Financial Instruments

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

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

Interest Rate and Cross-Currency Swaps

The Company uses interest rate swaps and cross-currency swaps to reduce its exposure to interest rate risk and foreign currency risk. The Company designates the interest rate swaps as cash flow hedges and the cross-currency swaps as net investment hedges. The proceeds from these contracts are reflected as "Cash flows from operating activities" in the Consolidated Statement of Cash Flows. For interest rate swaps, changes in fair value are recorded in "Accumulated other comprehensive loss" and reclassified to "Interest expense, net" in the Consolidated Statements of Operations as the underlying hedged item affects earnings. For cross-currency swaps changes in fair value are recorded in "Foreign currency translation" in "Accumulated other comprehensive loss." These cross-currency swaps effectively convert the Company's term loans under the Credit Agreement, which are U.S. dollar denominated debt obligations, into fixed-rate euro-denominated debt through the expiration of the swaps.

In 2021, the Company entered into forward starting interest rate swaps with an effective date of September 1, 2021 to effectively fix the floating rate of the interest payments associated with the $400 million Add-on Term Loans through January 2025. These contracts were designated as a cash flow hedge. The Company also entered into forward starting cross-currency swaps to effectively convert the $400 million Add-on Term Loans, which are U.S. dollar denominated debt obligations, into fixed-rate euro-denominated debt through January 2025. The Company designated these contracts as a net investment hedge of the foreign currency exposure of a portion of its net investment in certain euro functional subsidiaries. The changes in the fair value of these swap contracts were not material before their effective date of September 1, 2021.

In 2019, the Company entered into interest rate swaps to effectively fix the floating rate of the interest payments associated with the initial $750 million term loans under the Credit Agreement through January 2024. These contracts were designated as a cash flow hedge. The Company also entered into cross-currency swaps to effectively convert the $750 million term loans, which are U.S. dollar denominated debt obligations, into fixed-rate euro-denominated debt through January 2024. The Company designated these contracts as a net investment hedge of the foreign currency exposure of a portion of its net investment in certain euro functional subsidiaries.

The net result of the above hedges, which expire in January 2024 and 2025, respectively, is an interest rate of approximately 2.1% at December 31, 2021, which could vary in the future due to changes in the euro and the U.S. dollar exchange rate.

During 2021 and 2020, the Company's interest rate swaps and cross-currency swaps were deemed highly effective. The Company expects to reclassify $15.1 million of expense from "Accumulated other comprehensive loss" to "Interest expense, net" in the Consolidated Statements of Operations within the next twelve months.

Foreign Currency

The Company conducts a significant portion of its business in currencies other than the U.S. dollar and certain of its subsidiaries conduct business in currencies other than their functional currency, which is typically their local currency. As a result, the Company’s operating results are impacted by foreign currency exchange rate volatility.

At December 31, 2021, the Company held foreign currency forward contracts to purchase and sell various currencies to mitigate foreign currency exposure primarily with the U.S. dollar and British pound. The Company has not designated any foreign currency exchange forward contracts as eligible for hedge accounting and, as a result, changes in the fair value of foreign currency forward contracts are recorded in the Consolidated Statements of Operations as "Other expense, net." The total notional value of foreign currency exchange forward contracts held at December 31, 2021 and 2020 was approximately $64.6 million and $78.5 million, respectively, with settlement dates generally within one year. The market value of the foreign currency forward contracts was a $0.1 million net current liability at December 31, 2021 and a $0.5 million net current liability at December 31, 2020.

Commodities

As part of its risk management policy, the Company enters into commodity futures contracts for the purpose of mitigating its exposure to fluctuations in prices of certain metals used in the production of its finished goods. The Company held futures contracts to purchase and sell various metals, primarily tin and silver, for a notional amount of $56.1 million and $25.0 million at December 31, 2021 and 2020, respectively. The market value of the metals forward contracts was a $1.1 million net current liability at December 31, 2021 and a $1.2 million net current liability at December 31, 2020. Substantially all contracts outstanding at December 31, 2021 have delivery dates within one year. The Company has not designated these derivatives as hedging instruments and, accordingly, records changes in their fair values in the Consolidated Statements of Operations as "Other expense, net."

Realized gains and losses on derivative contracts are accounted for in the Consolidated Statements of Cash Flows as "Operating activities."

Fair Value Measurements

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis:


			December 31,
(dollars in millions)	Balance sheet location	Classification	2021		2020
Asset Category
Foreign exchange contracts not designated as hedging instruments	Other current assets	Level 2	$	0.1	$	0.2
Metals contracts not designated as hedging instruments	Other current assets	Level 2	1.2		0.4

Cross-currency swaps designated as net investment hedge	Other current assets	Level 2	22.2		16.3
Interest rate swaps designated as cash flow hedging instruments	Other assets	Level 2	6.6		—
Cross-currency swaps designated as net investment hedge	Other assets	Level 2	5.8		—

Total			$	35.9	$	16.9

Liability Category
Foreign exchange contracts not designated as cash flow hedging instruments	Accrued expenses and other current liabilities	Level 2	$	0.2	$	0.7
Metals contracts not designated as hedging instruments	Accrued expenses and other current liabilities	Level 2	2.3		1.6
Interest rate swaps designated as cash flow hedging instruments	Accrued expenses and other current liabilities	Level 2	15.1		17.6
Interest rate swaps designated as cash flow hedging instruments	Other liabilities	Level 2	9.6		33.5
Cross-currency swaps designated as net investment hedge	Other liabilities	Level 2	2.8		43.3
Total			$	30.0	$	96.7

Derivative assets and liabilities include foreign currency, metals, forward starting swaps, interest rate swaps and cross-currency swaps. The fair values are determined using pricing models based upon observable market inputs, such as market spot and futures prices on over-the-counter derivative instruments, market interest rates and consideration of counterparty credit risk.

There were no significant transfers of financial instruments between the fair value hierarchy levels during 2021.

The carrying value and estimated fair value of the Company’s long-term debt totaled $1.90 billion and $1.93 billion, respectively, at December 31, 2021. At December 31, 2020, the carrying value and estimated fair value totaled $1.52 billion and $1.55 billion, respectively. The carrying values noted above include unamortized discounts and debt issuance costs. The estimated fair value of long-term debt is measured using quoted market prices for similar instruments at the reporting date multiplied by the gross carrying amount of the related debt, which excludes unamortized discounts and debt issuance costs. Such instruments are valued using Level 2 inputs.