XML 29 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Financial Instruments
 9 Months Ended
Sep. 30, 2020
Investments, All Other Investments [Abstract]  
Financial Instruments FINANCIAL INSTRUMENTS
Fair Value
Accounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:
•Level 1 — Quoted prices for identical instruments in active markets.
•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 16 of our 2019 Form 10-K.
These valuations take into consideration the Company's credit risk and its counterparties’ credit risk. The estimated change in the fair value of these instruments due to such changes in its own credit risk (or instrument-specific credit risk) was immaterial as of September 30, 2020.
The carrying values and the estimated fair values of financial instruments at September 30, 2020 and December 31, 2019 consisted of the following:
 September 30, 2020December 31, 2019
(DOLLARS IN THOUSANDS)Carrying ValueFair ValueCarrying ValueFair Value
LEVEL 1
Cash and cash equivalents(1)
$469,840 $469,840 $606,823 $606,823 
LEVEL 2
Credit facilities and bank overdrafts(2)
1,666 1,666 3,131 3,131 
Derivatives
Derivative assets(3)
2,534 2,534 3,575 3,575 
Derivative liabilities(3)
16,021 16,021 7,415 7,415 
Long-term debt:(4)
2020 Notes— — 299,381 302,700 
2021 Euro Notes350,646 352,520 334,561 338,244 
2023 Notes299,234 316,527 299,004 305,580 
2024 Euro Notes584,429 611,473 558,124 586,825 
2026 Euro Notes931,723 983,308 890,183 945,306 
2028 Notes396,925 469,184 396,688 441,500 
2047 Notes493,887 570,413 493,571 526,106 
2048 Notes786,160 994,157 785,996 919,040 
Term Loan(2)
239,766 240,000 239,621 240,000 
2022 Term Loan(2)
199,261 200,000 — — 
Amortizing Notes(5)
47,970 48,734 82,079 84,430 
_______________________
(1)The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.
(2)The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments.
(3)The carrying amount approximates fair value as the instruments are marked-to-market and held at fair value on the Consolidated Balance Sheet.
(4)The fair value of the Company's long-term debt was calculated using discounted cash flows applying current interest rates and current credit spreads based on its own credit risk.
(5)The fair value of the Amortizing Notes of the TEUs is based on the most recently quoted price for the outstanding securities, adjusted for any known significant deviation in value. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange.
Derivatives
Foreign Currency Forward Contracts
The Company periodically enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with its intercompany loans, foreign currency receivables and payables and anticipated purchases of certain raw materials used in operations. These contracts generally involve the exchange of one currency for a second currency at a future date, have maturities not exceeding twelve months and are with counterparties which are major international financial institutions.
Cash Flow Hedges
The Company maintains several forward currency contracts which qualified as cash flow hedges. The objective of these hedges is to protect against the currency risk associated with forecasted U.S. dollar ("USD") denominated raw material purchases made by Euro ("EUR") functional currency entities which result from changes in the EUR/USD exchange rate. The effective portions of cash flow hedges are recorded in OCI as a component of (Losses) gains on derivatives qualifying as hedges in the accompanying Consolidated Statement of Income and Comprehensive Income (Loss). Realized gains/(losses) in AOCI related to cash flow hedges of raw material purchases are recognized as a component of Cost of goods sold in the accompanying Consolidated Statement of Income and Comprehensive Income (Loss) in the same period as the related costs are recognized.
Hedges Related to Issuances of Debt
Subsequent to the issuance of the 2021 Euro Notes and 2026 Euro Notes during the third quarter of 2018, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive Income (Loss).
Subsequent to the issuance of the 2024 Euro Notes during the first quarter of 2016, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive Income (Loss).
Cross Currency Swaps
During the third quarter of 2019, the Company entered into four EUR/USD cross currency swaps that mature through May 2023. The swaps all qualified as net investment hedges in order to mitigate a portion of the Company's net European investments from foreign currency risk. During the third quarter of 2020, the Company entered into a transaction to unwind two of the swaps issued in the third quarter of 2019 and paid proceeds of $14.6 million, net of accrued interest receivable of $2.2 million. The loss arising from the termination of the swaps has been included as a component of accumulated other comprehensive loss. As of September 30, 2020, the two remaining swaps were in a net liability position with an aggregate fair value of $8.5 million which was classified as other current liabilities. Changes in fair value related to cross currency swaps are recorded in OCI.
The following table shows the notional amount of the Company’s derivative instruments outstanding as of September 30, 2020 and December 31, 2019: 
(DOLLARS IN THOUSANDS)September 30, 2020December 31, 2019
Foreign currency contracts$392,199 $473,600 
Cross currency swaps300,000 600,000 
The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of September 30, 2020 and December 31, 2019:
 September 30, 2020
(DOLLARS IN THOUSANDS)Fair Value of
Derivatives
Designated as
Hedging
Instruments		Fair Value of
Derivatives Not
Designated as
Hedging
Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts$909 $1,625 $2,534 
Derivative liabilities(b)
Foreign currency contract$5,117 $2,446 $7,563 
Cross currency swaps8,458 — 8,458 
Total derivative liabilities$13,575 $2,446 $16,021 
 December 31, 2019
(DOLLARS IN THOUSANDS)Fair Value of
Derivatives
Designated as
Hedging
Instruments		Fair Value of
Derivatives Not
Designated as
Hedging
Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts$1,310 $2,265 $3,575 
Derivative liabilities(b)
Foreign currency contracts$797 $2,431 $3,228 
Interest rate swaps4,187 — 4,187 
Total derivative liabilities$4,984 $2,431 $7,415 
 _______________________
(a)Derivative assets are recorded to Prepaid expenses and other current assets in the Consolidated Balance Sheet.
(b)Derivative liabilities are recorded as Other current liabilities in the Consolidated Balance Sheet.
The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019 (in thousands): 
Amount of Gain (Loss)Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS)Three Months Ended September 30,
20202019
Foreign currency contracts(1)
$4,460 $(4,392)Other expense (income), net
Amount of Gain (Loss)Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS)Nine Months Ended September 30,
20202019
Foreign currency contracts(1)
$1,108 $(7,398)Other expense (income), net
_______________________
(1)The foreign currency contract net gains (losses) offset any recognized gains (losses) arising from the revaluation of the related intercompany loans during the same respective periods.
The following table shows the effect of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019 (in thousands): 
 Amount of Gain (Loss) 
Recognized in OCI on
Derivative		Location of Gain (Loss) Reclassified from
AOCI into Income		Amount of Gain (Loss) 
Reclassified from
Accumulated OCI into
Income
 Three Months Ended September 30,Three Months Ended September 30,
(DOLLARS IN THOUSANDS)2020201920202019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts$(4,966)$2,438 Cost of goods sold$1,207 $1,924 
Interest rate swaps (1)
215 216 Interest expense(215)(216)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps(8,370)17,803 N/A— — 
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes(18,135)16,437 N/A— — 
2021 Euro Notes & 2026 Euro Notes(39,896)36,162 N/A— — 
Total$(71,152)$73,056 $992 $1,708 
 Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)		Location of Gain (Loss)
Reclassified from AOCI into Income (Effective Portion)		Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
 Nine Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts$(7,049)$(265)Cost of goods sold$4,527 $6,619 
Interest rate swaps (1)
644 644 Interest expense(644)(644)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps(1,988)24,408 N/A— — 
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes(19,640)15,820 N/A— — 
2021 Euro Notes & 2026 Euro Notes(43,207)34,804 N/A— — 
Total$(71,240)$75,411 $3,883 $5,975 
 _______________________
(1)Interest rate swaps were entered into as pre-issuance hedges for bond offerings.
The ineffective portion of the above noted cash flow hedges were not material during the three and nine months ended September 30, 2019.
The Company expects that $4.1 million (net of tax) of derivative gain included in AOCI at September 30, 2020, based on current market rates, will be reclassified into earnings within the next 12 months. The majority of this amount will vary due to fluctuations in foreign currency exchange rates.