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Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities  
Derivative Instruments and Hedging Activities
9.
Derivative Instruments and Hedging Activities
Commodity Price Risk Management
At September 30, 2021 and December 31, 2020, the Company had fixed price commodity contracts with notional amounts aggregating $4.5 million and $8.8 million, respectively. As commodity contracts settle, gains (losses) as a
 
result of changes in fair values are adjusted to the contracts with the customers through revenue.
Foreign Exchange Rate Risk
 
Management
The Company had notional amounts outstanding under forward currency contracts and cross-currency interest rate swap agreements as of (dollars in millions):
 
    
September 30, 2021
    
December 31, 2020
  
    
Notional
Amount in U.S.
Dollars
     
Fair Value
    
Notional
Amount in U.S.
Dollars
     
Fair Value
  
Forward currency contracts (1):
                                   
Assets
    $ 10.4      $ —       $ 175.8      $ 2.1  
Liabilities
      114.1        (0.7 )      102.5        (0.4 ) 
Cross-currency and interest rate swap agreements (2):
                                   
Liabilities
      505.0        (21.9 )      505.0        (53.9 ) 
Long-term debt
                                   
Liabilities
      318.1        (20.2 )      335.5        (37.6 ) 
    
 
 
     
 
 
    
 
 
     
 
 
  
Total
    $ 947.6      $ (42.8 )    $ 1,118.8      $ (89.8 ) 
    
 
 
     
 
 
    
 
 
     
 
 
  
 
(1)
Derivatives not designated as accounting hedges.
(2)
Derivatives designated as accounting hedges.
In addition, the Company periodically enters into purchase and sales contracts denominated in currencies other than the functional currency of the parties to the transaction. The Company accounts for these transactions separately valuing the “embedded derivative” component of these contracts. The contracts, denominated in currencies other than the functional currency of the transacting parties, amounted to $6.0 million for the delivery of products and $7.0 million for the purchase of products at September 30, 2021 and $7.5 million for the delivery of products and $4.8 million for the purchase of products at December 31, 2020. The changes in the fair value of these embedded derivatives are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income.
 
The derivative instruments described above are recorded in the unaudited condensed consolidated balance sheets for the periods ended as follows (dollars in millions):
 
    
September 30,

2021
     
December 31,

2020
  
Derivatives designated as hedging instruments
                  
Interest rate cross-currency swap agreements
                  
Other current assets
    $ 7.1      $ 7.6  
Other current liabilities
      (8.5 )       (4.3 ) 
Other long-term liabilities
      (20.5 )       (57.2 ) 
    
 
 
     
 
 
  
       (21.9 )       (53.9 ) 
Long-term debt
                  
Long-term debt
      (20.2 )       (37.6 ) 
    
 
 
     
 
 
  
Total derivatives designated as hedging instruments
   
$
 (42.1 )    
$
 (91.5 ) 
    
 
 
     
 
 
  
Derivatives not designated as hedging instruments
                  
Forward currency contracts
                  
Other current assets
    $ —        $ 2.1  
Other current liabilities
      (0.7 )       (0.4 ) 
Embedded derivatives in purchase and delivery contracts
                  
Other current assets
      —          0.1  
Other current liabilities
      (0.1 )       —    
Fixed price commodity contracts
                  
Other current assets
      0.8        3.1  
    
 
 
     
 
 
  
Total derivatives not designated as hedging instruments
      —          4.9  
    
 
 
     
 
 
  
Total derivatives
    $ (42.1 )     $ (86.6 ) 
    
 
 
     
 
 
  
The following is a summary of the activity included in the unaudited condensed consolidated statements of income and comprehensive income related to the derivative instruments described above (in millions):
 
        
Location of gain (loss) recognized in income on derivative
  
        
Three Months Ended

September 30,
Nine Months Ended

September 30,
  
    
 
Financial Statement Classification
  
2021
    
2020
2021
    
2020
  
Derivatives not designated as hedging instruments
                            
Forward currency contracts
    Interest and other income (expense), net  
$
(0.9
 )  
$
(0.2
)
$
(4.8
) 
  
$
(0.4
) 
Embedded
 
derivatives
 
in
 
purchase
and delivery contracts
    Interest and other income (expense), net  
 
0.1
 
    
(0.1
)
 
(0.3
) 
    
0.8
 
        
 
 
    
 
 
    
 
 
    
 
 
  
        
 
(0.8
 )    
(0.3
)
 
(5.1
) 
    
0.4
 
Derivatives designated as cash flow hedging instruments
                            
Interest rate cross-currency swap agreements
    Interest and other income (expense), net  
$
(1.2
) 
  
$
(1.1
)
$
(3.5
) 
  
$
(1.9
) 
Derivatives designated as net investment hedging instruments
                            
Interest rate cross-currency swap agreements
    Interest and other income (expense), net  
2.6
 
  
2.5
7.6
 
  
7.7
 
        
 
 
    
 
 
  
 
 
    
 
 
  
        
 
1.4
 
    
1.4
 
  4.1
 
    
5.8
 
        
 
 
    
 
 
    
 
 
    
 
 
  
Total
       
$
0.6
 
  
$
1.1
$
(1.0
) 
  
$
6.2
 
        
 
 
    
 
 
    
 
 
    
 
 
  
         
Amount of unrealized gain (loss) on contracts recognized
in
other comprehensive income (loss)
  
        
Three Months Ended

September 30,
Nine Months Ended

September 30,
  
    
Financial Statement Classification
  
2021
    
2020
2021
    
2020
  
Derivatives designated as cash flow hedging instruments
                            
Interest rate cross-currency
swap agreements
  
 
 		 Accumulated other comprehensive income, net of tax  
$
0.9
 
  
$
(0.2
)
$
11.5
 
  
$
(22.1
)
        
 
 
    
 
 
    
 
 
    
 
 
  
        
$
0.9
 
  
$
(0.2
)
$
11.5
 
  
$
(22.1
)
Derivatives designated as net investment hedging instruments
                            
Interest rate cross-currency swap agreements
    Accumulated other comprehensive income, net of tax  
$
7.4
 
  
$
(21.9
)
$
25.6
 
  
$
(0.3
)
Long-term debt
    Accumulated other comprehensive income, net of tax  
 
2.2
    
 
(8.2
)
 
22.2
 
    
(15.3
)
        
 
 
    
 
 
    
 
 
    
 
 
  
        
$
9.6
    
$
(30.1
)
$
47.8
 
  
$
(15.6
 )
        
 
 
    
 
 
    
 
 
    
 
 
  
Total
       
$
10.5
 
  
$
(30.3
)
$
59.3
 
  
$
(37.7
)