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Derivative Financial Instruments and Risk Management
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Risk Management DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Derivative financial instruments

All derivatives are recorded as assets or liabilities in the Condensed Consolidated Balance Sheets at their respective fair values. For derivatives designated as cash flow hedges, the unrealized gain or loss related to the derivatives is recorded in Other comprehensive income (loss) until the hedged transaction affects earnings. The Company assesses at the inception of the hedge, whether the derivative in the hedging transaction will be highly effective in offsetting changes in cash flows of the hedged item. Changes in the fair value of derivatives that do not meet the criteria for designation as a hedge are recognized in earnings.
Foreign Exchange: The Company manufactures and sells products in a number of countries throughout the world and, as a result, the Company is exposed to movements in foreign currency exchange rates. The Company's major foreign currency exposures involve the markets in Western Europe, South America and Asia. Some sales and purchase contracts contain embedded derivatives due to the nature of doing business in certain jurisdictions, which the Company takes into consideration as part of its risk management policy. The purpose of foreign currency hedging activities is to manage the economic impact of exchange rate volatility associated with anticipated foreign currency purchases and sales made in the normal course of business. The Company primarily utilizes forward foreign exchange contracts with maturities of less than one year in managing this foreign exchange rate risk. The Company has not designated these forward foreign exchange contracts, which had a notional value at March 31, 2024 of $543.7 million, as hedges and therefore does not apply hedge accounting.

The fair values of our foreign currency derivative assets are recorded within other current assets and other assets, and the fair values of foreign currency derivative liabilities are recorded within other current liabilities and other liabilities. The following table presents the fair value of foreign currency derivatives and embedded derivatives included within the Condensed Consolidated Balance Sheets:
As of March 31, 2024As of December 31, 2023
(In millions)Derivative AssetsDerivative LiabilitiesDerivative AssetsDerivative Liabilities
Total$2.8 $6.5 $13.6 $3.0 

A master netting arrangement allows counterparties to net settle amounts owed to each other as a result of separate offsetting derivative transactions. The Company enters into master netting arrangements with its counterparties when possible to mitigate credit risk in derivative transactions by permitting it to net settle for transactions with the same counterparty. However, the Company does not net settle with such counterparties. As a result, derivatives are presented at their gross fair values in the Condensed Consolidated Balance Sheets.

As of March 31, 2024 and December 31, 2023, information related to these offsetting arrangements was as follows:

(In millions)As of March 31, 2024
Offsetting of AssetsGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsAmount Subject to Master Netting AgreementNet Amount
Derivatives$13.6 $— $13.6 $(2.4)$11.2 
(In millions)As of March 31, 2024
Offsetting of LiabilitiesGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsAmount Subject to Master Netting AgreementNet Amount
Derivatives$6.5 $— $6.5 $(2.4)$4.1 

(In millions)As of December 31, 2023
Offsetting of AssetsGross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsAmount Subject to Master Netting AgreementNet Amount
Derivatives$25.8 $— $25.8 $(2.3)$23.5 
(In millions)As of December 31, 2023
Offsetting of LiabilitiesGross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetsNet Presented in the Consolidated Balance SheetsAmount Subject to Master Netting AgreementNet Amount
Derivatives$2.3 $— $2.3 $(2.3)$— 
The following table presents the location and amount of the gain (loss) on foreign currency derivatives and on the remeasurement of assets and liabilities denominated in foreign currencies, as well as the net impact recognized in the Condensed Consolidated Statements of Income: 

Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in Income on Derivatives
Amount of Gain (Loss) Recognized in Income
Three Months Ended March 31,
(In millions)20242023
Foreign exchange contractsRevenue$(3.6)$0.9 
Foreign exchange contractsCost of sales1.9 0.6 
Foreign exchange contractsSelling, general and administrative expense(0.3)0.2 
Total(2.0)1.7 
Remeasurement of assets and liabilities in foreign currencies0.3 (0.7)
Net gain (loss)$(1.7)$1.0 

Interest Rates: The Company has entered into four interest rate swaps executed in March 2020 with a combined notional amount of $200 million expiring in April 2025, and one interest rate swap executed in May 2020 with a notional amount of $50 million expiring in May 2025. These interest rate swaps fix the interest rate applicable to certain of the Company's variable-rate debt. The agreements swap one-month SOFR rates for fixed rates. The Company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income (loss).

At March 31, 2024, the fair value of these derivatives designated as cash flow hedges is recorded in the Condensed Consolidated Balance Sheets as Other assets of $11.2 million and as Accumulated other comprehensive income, net of tax, of $8.3 million. At December 31, 2023, the fair value of these derivatives designated as cash flow hedges is recorded in the Condensed Consolidated Balance Sheets as Other assets of $12.3 million and as Accumulated other comprehensive income, net of tax, of $9.2 million.

Refer to Note 10. Fair Value Of Financial Instruments for a description of how the values of the above financial instruments are determined.

Credit Risk

By their nature, financial instruments involve risk including credit risk for non-performance by counterparties. Financial instruments that potentially subject the Company to credit risk primarily consist of trade receivables and derivative contracts. The Company manages the credit risk on financial instruments by transacting only with financially secure counterparties, requiring credit approvals and establishing credit limits, and monitoring counterparties’ financial condition. The Company's maximum exposure to credit loss in the event of non-performance by the counterparty, for all receivables and derivative contracts as of March 31, 2024, is limited to the amount drawn and outstanding on the financial instrument. Refer to Note 1. Description of Business and Basis of Presentation in Item 8. Financial Statements and Supplementary Data of the Company's most recent Annual Report on Form 10-K, for a description of how allowance for credit loss is determined on financial assets measured at amortized cost, which includes Trade receivables, Contract assets, and non-current receivables.