Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

12. Derivative Financial Instruments

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter into financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments are major financial institutions. We continually monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. The majority of the Company’s exposure to local currency movements is in Europe (both the Euro and the British pound), Brazil, Canada, Australia, Mexico and Japan. Principal currencies hedged include the U.S. dollar, Euro, Australian dollar, Canadian dollar, British pound and Japanese yen. We are subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues to monitor the status of our counterparties and will take action, as appropriate, to further manage our counterparty credit risk. There are no credit contingency features in our derivative financial instruments.

When hedge accounting is applicable, on the date we enter into a derivative, the derivative is designated as a hedge of the identified exposure. We measure the effectiveness of our hedging relationships both at hedge inception and on an ongoing basis.

Forward Currency Contracts

We enter into forward foreign currency contracts to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventory purchases and intercompany loans.

Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Canada, Australia and Japan and are designated as cash flow hedges. Unrealized gains and losses on these contracts for inventory purchases are deferred in other comprehensive income (loss) until the contracts are settled and the underlying hedged transactions are recognized, at which time the deferred gains or losses will be reported in the "Cost of products sold" line in the Consolidated Statements of Income. As of December 31, 2015 and 2014, the Company had cash flow designated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $68.2 million and $68.4 million, respectively.

Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses on these derivative instruments are recognized within "Other expense, net" in the Consolidated Statements of Income and are largely offset by the change in the current translated value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, and do not extend beyond 2016. As of December 31, 2015 and 2014, we have undesignated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $33.3 million and $55.8 million, respectively.

The following table summarizes the fair value of our derivative financial instruments as of December 31, 2015 and 2014:

	Fair Value of Derivative Instruments
	Derivative Assets					Derivative Liabilities
(in millions of dollars)	Balance Sheet Location	December 31, 2015		December 31, 2014		Balance Sheet Location	December 31, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Foreign exchange contracts	Other current assets	$	1.9	$	4.6	Other current liabilities	$	0.3	$	0.1
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current assets	0.7		0.1		Other current liabilities	0.1		0.4
Total derivatives		$	2.6	$	4.7		$	0.4	$	0.5

The following tables summarizes the pre-tax effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013:

	The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Financial Statements
	Amount of Gain (Loss) Recognized in OCI (Effective Portion)						Location of (Gain) Loss Reclassified from OCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
(in millions of dollars)	2015		2014		2013			2015			2014			2013
Cash flow hedges:
Foreign exchange contracts	$	8.2	$	6.9	$	3.7	Cost of products sold	$	(10.9	)	$	(3.5	)	$	(3.4	)

	The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
	Location of (Gain) Loss Recognized in Income on Derivatives	Amount of (Gain) Loss Recognized in Income year ended December 31,
(in millions of dollars)		2015			2014		2013
Foreign exchange contracts	Other expense, net	$	(0.5	)	$	1.3	$	(0.6	)