Derivative Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

In the normal course of business, the Company is exposed to risks relating to changes in foreign currency exchange rates, interest rates and commodity prices. Derivative financial instruments, such as foreign currency exchange forward contracts, interest rate swaps and commodities futures contracts are used to manage the risks associated with changes in the conditions of those markets. All derivatives are recognized in the Condensed Consolidated Balance Sheets at fair value at the end of each period. The counterparties to the Company’s derivative agreements are primarily major international financial institutions. The Company continually monitors its positions and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties.

Foreign Currency

The Company conducts a significant portion of its business in currencies other than the U.S. Dollar and a portion of its business in currencies other than the functional currencies of its subsidiaries. As a result, the Company’s operating results are impacted by foreign currency exchange rate volatility.

As of March 31, 2017, the Company held foreign currency forward contracts to purchase and sell various currencies primarily with U.S. Dollars and Euros, with less significant amounts with Japanese Yen. The Company has not designated any foreign currency exchange forward contracts as eligible for hedge accounting. The total U.S. Dollar equivalent of foreign currency exchange forward contracts held at March 31, 2017 was approximately $914 million. Substantially all foreign currency exchange contracts held at March 31, 2017 have settlement dates within one year.

The following table details the Company's significant outstanding foreign exchange derivative contracts as of March 31, 2017:

(in millions)	Traded against USD				Traded against EUR (USD equivalent)
Currency	Purchasing		Selling		Purchasing		Selling
Euro (EUR)	$	157.9	$	347.5	$	—	$	—
Brazilian Real (BRL)	45.2		123.7		—		2.2
Japanese Yen (JPY)	45.1		20.6		3.3		3.5
British Pound (GBP)	31.2		—		82.2		—
Other	19.4		19.8		—		0.6
Total	$	298.8	$	511.6	$	85.5	$	6.3

The change in the net fair value of the foreign currency forward contracts is recorded in "Other expense, net" in the Condensed Consolidated Statements of Operations.

Interest Rates

In August 2015, the Company entered into a series of pay fixed, receive floating interest rate swaps with respect to a portion of its indebtedness. The swaps effectively fix the floating base rate portion of the interest payments on approximately $1.15 billion of the Company's USD denominated debt and €281 million of its Euro denominated debt at 1.96% and 1.20%, respectively, through June 2020.

Changes in the fair value of a derivative that is designated as, and meets all the required criteria of, a cash flow hedge are recorded in "Other comprehensive income (loss)" and reclassified from "Accumulated other comprehensive income (loss)" into earnings as the underlying hedged item affects earnings. Amounts reclassified into earnings related to the interest rate swaps are included in "Interest expense, net" in the Condensed Consolidated Statements of Operations.

Commodities

As part of its risk management policy, the Company enters into commodities futures contracts on an ongoing basis for the purpose of mitigating its exposure to fluctuations in prices of certain metals it uses in the production of its finished goods.  The Company held futures contracts to purchase and sell various metals, primarily silver and tin, for a notional amount of $39.2 million and $42.0 million as of March 31, 2017 and December 31, 2016, respectively. All contracts outstanding at March 31, 2017 have delivery dates within the next twelve months. The change in the net fair value of the commodities futures contracts is recorded in "Other expense, net" in the Condensed Consolidated Statements of Operations.

Certain subsidiaries of the Company have entered into supply agreements with a third party that have been deemed to constitute financing agreements with an embedded derivative feature whose fair value is determined by the change in the market value of the underlying metals between delivery date and measurement date.  Amounts associated with these supply agreements, which serve as the notional value of the embedded derivative, have been recorded in "Inventories" and "Current installments of long-term debt and revolving credit facilities" in the Condensed Consolidated Balance Sheets and totaled $10.5 million and $9.9 million at March 31, 2017 and December 31, 2016, respectively, and primarily relate to gold and palladium purchases. The fair value of these contracts has been bifurcated and recorded as a derivative liability in "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets and totaled $0.2 million at March 31, 2017 and December 31, 2016.

Fair Value of Derivative Instruments

The following table summarizes the fair value of derivative instruments reported in the Condensed Consolidated Balance Sheets:

(amounts in millions)	Balance sheet location	March 31, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Accrued expenses and other current liabilities	$	8.5		$	10.2
Derivatives not designated as hedging instruments:
Foreign exchange and metals contracts	Other current assets	8.4			8.5
Foreign exchange and metals contracts	Accrued expenses and other current liabilities	12.0			10.7
Net derivative contract liability		$	(12.1	)	$	(12.4	)

For the three months ended March 31, 2017 and 2016, the Company recorded the following realized and unrealized losses associated with derivative contracts designated as hedging instruments and made the following reclassifications from Accumulated Other Comprehensive Income:

(amounts in millions)	Amount of loss recognized in Other Comprehensive Income for the three months ended March 31,				Location of loss reclassified from Accumulated Other Comprehensive Income	Amount of loss reclassified from Accumulated Other Comprehensive Income into income for the three months ended March 31,
Derivatives designated as hedging instruments:	2017		2016			2017		2016
Interest rate swaps	$	1.4	$	13.9	Interest expense, net	$	3.0	$	2.9

The interest rate swaps were deemed highly effective, with no ineffective portions, for the three months ended March 31, 2017. During the next twelve months, the Company expects to reclassify $8.5 million from "Accumulated other comprehensive income" to "Interest expense, net" in the Condensed Consolidated Statements of Operations.

For the three months ended March 31, 2017 and 2016, the Company recorded the following realized and unrealized losses associated with derivative contracts not designated as hedging instruments:

(amounts in millions)	Location of loss recognized in income on derivatives	Amount of loss recognized in income on derivatives for the three months ended March 31,
Derivatives not designated as hedging instruments:		2017		2016
Foreign exchange and metals contracts	Other expense, net	$	1.4	$	5.3

Master Netting Arrangements

In the normal course of business, the Company enters into contracts with certain counterparties to purchase and sell foreign currency exchange forwards and metal futures that contain master netting arrangements, typically in the form of an International Swaps and Derivatives Association (ISDA) or similar agreements. The right to set-off within these agreements is limited to certain termination events, such as bankruptcy or default of either party to the agreement. The Company has made an accounting policy decision not to offset and recognizes gross derivative asset and liability balances in the Condensed Consolidated Balance Sheets.

The following tables present recognized derivative assets and liabilities that are subject to master netting arrangements but not offset, as of March 31, 2017 and December 31, 2016, and shows in the "Net" column what the net impact would be on the Condensed Consolidated Balance Sheets if all set-off rights were exercised:

	March 31, 2017
(amounts in millions)	Amounts offset						Amounts not offset						Net
	Gross		Gross offset		Net amounts presented		Financial instruments			Cash collateral paid
Derivative assets	$	7.4	$	—	$	7.4	$	(0.3	)	$	—		$	7.1
Derivative liabilities	11.3		—		11.3		(3.4		)	(0.8		)	7.1

	December 31, 2016
(amounts in millions)	Amounts offset						Amounts not offset						Net
	Gross		Gross offset		Net amounts presented		Financial instruments			Cash collateral paid
Derivative assets	$	6.3	$	—	$	6.3	$	(2.5	)	$	—		$	3.8
Derivative liabilities	8.9		—		8.9		(2.6		)	(1.0		)	5.3

Collateral paid to counterparties is recorded in "Other current assets" in the Condensed Consolidated Balance Sheets.