Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 12 — Derivative Financial Instruments

Interest Rate Swap Agreements

As of December 31, 2015, the Company had two agreements to swap $75 million of floating rate obligations for fixed rate obligations at an average of 0.959% and 0.754% against LIBOR in U.S. dollars. Of the total of $150 million of swaps outstanding at December 31, 2015, $50 million matures each of March 2016, September 2016 and March 2017. All of the swaps were accounted for as cash flow hedges of our floating rate bank loans. To ensure the swaps were highly effective, all the principal terms of the swaps matched the terms of the bank loans. The fair value of the interest rate swaps was a liability of $0.1 million at December 31, 2015 and an asset of $0.1 million and a liability of $0.3 million at December 31, 2014.

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British pound sterling through June 2018. The aggregate notional amount of these contracts was $417.5 million and $255.8 million at December 31, 2015 and December 31, 2014, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges was a loss of $26.7 million; $18.4 million and a gain of $7.9 million, for the years ended December 31, 2015, 2014 and 2013, respectively, and are recorded in other comprehensive income (“OCI”). At December 31, 2015, $0.9 million of the carrying amount of these contracts was classified in other assets and $22.1 million in other liabilities on the consolidated balance sheets and $0.3 million in other assets and $12.7 million classified in other liabilities at December 31, 2014. During the years ended December 31, 2015, 2014 and 2013, we recognized a net loss of $18.4 million, a net gain of $4.6 million and $0.4 million, respectively, recorded in sales. For the three years ended December 31, 2015, 2014 and 2013, hedge ineffectiveness was immaterial.

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the years ended December 31, 2015, 2014 and 2013, we recognized a net foreign exchange loss of $14.9 million, a loss of $16.3 million, and a gain of $7.6 million, respectively, in the consolidated statements of operations. The carrying amount of the contracts for asset and liability derivatives not designated as hedging instruments was $0.4 million classified in other assets and $0.4 million in other liabilities and $0.8 million classified in other assets and $5.5 million in other liabilities on the December 31, 2015 and 2014 consolidated balance sheets, respectively.

The activity, net of tax, in “accumulated other comprehensive (loss) income” related to foreign currency forward exchange contracts for the years ended December 31, 2015, 2014 and 2013 was as follows:

(In millions)	2015			2014			2013
Unrealized (losses) gains at beginning of period	$	(9.2	)	$	7.2		$	2.4
Losses (gains) reclassified to net sales		11.8			(3.2	)		(0.3	)
(Decrease) increase in fair value, net of tax of $3.0 million, $5.4 million and ($2.8) million in 2015, 2014 and 2013 respectively		(17.6	)		(13.2	)		5.1
Unrealized (losses) gains at end of period	$	(15.0	)	$	(9.2	)	$	7.2

Unrealized losses of $10.9 million recorded in “accumulated other comprehensive income,” net of tax of $4.4 million, as of December 31, 2015 are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded. The impact of credit risk adjustments was immaterial for the three years.