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Derivatives and Hedging
 12 Months Ended
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Derivatives and Hedging
During its normal course of business, the Company and its subsidiaries are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. The Company uses designated cash flow hedges and non-designated hedges in the form of foreign currency forward contracts as part of its strategy to manage the exposure to fluctuations in foreign currency exchange rates and to mitigate the impact of foreign currency translation on transactions that are denominated primarily in Japanese Yen, British Pounds, Euros, Canadian Dollars, Australian Dollars and Korean Won. The Company also uses interest rate swap contracts to mitigate the impact of variable interest rates on its long-term debt.
Foreign currency forward contracts and interest rate swap contracts are used only to meet the Company’s objectives of minimizing variability in its operating results arising from foreign exchange rate movements and changes in interest rates. The Company does not enter into foreign currency forward contracts and interest rate swap contracts for speculative purposes. The Company utilizes counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into and closely monitors the credit ratings of these counterparties.
The following table summarizes the fair value of the Company’s derivative instruments as well as the location of the asset and/or liability on the consolidated balance sheets as of December 31, 2022 and December 31, 2021 (in millions):
Fair Value of
Asset Derivatives
December 31,
Balance Sheet Location20222021
Derivatives designated as cash flow hedging instruments:
Foreign currency forward contractsOther current assets$0.1 $0.1 
Interest rate swap contractsOther current assets4.4 — 
Interest rate swap contractsOther assets, net2.8 — 
Total$7.3 $0.1 
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets0.1 0.2 
Total asset position$7.4 $0.3 
Fair Value of
Liability Derivatives
December 31,
Balance Sheet Location20222021
Derivatives designated as cash flow hedging instruments:
Foreign currency forward contractsAccounts payable and accrued expenses$2.6 $— 
Interest rate swap contractsAccounts payable and accrued expenses— 4.1 
Interest rate swap contractsOther long-term liabilities— 4.6 
2.6 8.7 
Derivatives not designated as hedging instruments:
Foreign currency forward contractsAccounts payable and accrued expenses2.8 0.2 
Total liability position$5.4 $8.9 
The Company’s derivative instruments are subject to a master netting agreement with each respective counterparty bank and are therefore net settled at their maturity date. Although the Company has the legal right of offset under the master netting agreements, the Company has elected not to present these contracts on a net settlement amount basis, and therefore presents these contracts on a gross basis on the accompanying consolidated balance sheets as of December 31, 2022 and 2021.
Cash Flow Hedging Instruments
Foreign Currency Forward Contracts
The Company uses foreign currency derivatives designated as qualifying cash flow hedging instruments, including foreign currency forward contracts to help mitigate the Company’s foreign currency exposure from intercompany sales of inventory and intercompany expense reimbursements to its foreign subsidiaries. These contracts generally mature within 12 months to 15 months from inception. As of December 31, 2022 and December 31, 2021, the notional amounts of the Company’s foreign currency forward contracts designated as cash flow hedging instruments were approximately $100.0 million and $3.3 million, respectively.
During the year ended December 31, 2022, the Company recorded net gains of $2.0 million in accumulated other comprehensive loss related to foreign currency forward contracts, and released net gains of $4.8 million in cost of products for the underlying sales that were recognized. Additionally, for the year ended December 31, 2022, net gains related to the amortization of forward points of $0.4 million were released from other comprehensive income and recognized in cost of products. Based on the current valuation, the Company expects to reclassify net losses of $2.4 million related to foreign currency forward contracts from accumulated other comprehensive income into earnings during the next 12 months.
For the years ended December 31, 2021 and 2020, the Company recognized net gains of $2.4 million and $0.8 million, respectively, in cost of goods sold related to foreign currency forward contracts.
Interest Rate Swap Contract and Cross-Currency Debt Swap
The Company uses an interest rate swap in order to mitigate the risk of changes in interest rates associated with the Company’s variable-rate Term Loan (see Note 7). Over the life of the Term Loan, the Company will receive variable interest payments from the counterparty lenders in exchange for fixed interest rate payments made by the Company at 2.54% on the Term Loan, without exchange of the underlying notional amount. As of December 31, 2022 and 2021, notional amounts outstanding under the interest rate hedge contract were $192.3 million and $194.3 million, respectively. During 2020, the Company unwound a cross-currency debt swap related to a euro-denominated intercompany loan and discontinued the hedge as forecasted transaction in connection with this loan was no longer probable of occurring. As a result, the Company released net gains of $11.1 million from accumulated other comprehensive income into other income (expense).
During the years ended December 31, 2022, 2021, and 2020, the Company recorded net gains in accumulated other comprehensive income of $14.2 million and $4.4 million, and a net loss of $12.9 million, respectively, related to the remeasurement of the interest rate swap contract. Of these amounts, net losses of $1.6 million, $4.8 million, and $3.9 million were released from accumulated other comprehensive loss and recognized in interest expense during the years ended December 31, 2022, 2021 and 2020, respectively. Based on the current valuation as of December 31, 2022, the Company expects to reclassify a net gain of $4.4 million related to the interest rate swap contract from accumulated other comprehensive loss into earnings during the next 12 months.
During the year ended December 31, 2020, the Company recorded a net remeasurement gain of $15.1 million in accumulated other comprehensive loss in connection with the cross-currency debt swap, and released net gains of $18.5 million from accumulated other comprehensive loss into earnings as follows:
•$11.1 million related to the discontinuation of the cross-currency swap contract recognized in other income;
•$5.7 million related to foreign currency recognized in other income; and
•$1.7 million recognized in interest expense.
The following tables summarize the net effect of all cash flow hedges on the consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 (in millions):
Gain (Loss) Recognized in Other Comprehensive Income
Year Ended December 31,
Derivatives designated as cash flow hedging instruments202220212020
Foreign currency forward contracts$2.0 $2.4 $0.8 
Cross-currency debt swap contracts— — 15.1 
Interest rate swap agreements14.2 4.4 (12.9)
$16.2 $6.8 $3.0 
Gain (Loss) Reclassified from Other Comprehensive Income into Earnings
Year Ended December 31,
Derivatives designated as cash flow hedging instruments202220212020
Foreign currency forward contracts$4.8 $1.7 $1.1 
Cross-currency debt swap contracts— — 18.5 
Interest rate swap agreements(1.6)(4.8)(3.9)
$3.2 $(3.1)$15.7 
Foreign Currency Forward Contracts Not Designated as Hedging Instruments
The Company uses foreign currency forward contracts that are not designated as qualifying cash flow hedging instruments to mitigate the exposure to fluctuations in foreign currency exchange rates due to the remeasurement of certain balance sheet payables and receivables denominated in foreign currencies, as well as gains and losses resulting from the translation of the operating results of the Company’s international subsidiaries into U.S. dollars for financial reporting purposes. These contracts generally mature within 12 months from inception. As of December 31, 2022, 2021 and 2020, the notional amounts of the Company’s foreign currency forward contracts used to mitigate the exposures discussed above were approximately $162.9 million, $67.8 million, and $81.6 million, respectively. The Company estimates the fair values of foreign currency forward contracts based on pricing models using current market rates, and records all derivatives on its consolidated balance sheet at fair value, with changes in fair value recorded in the consolidated statements of operations. Foreign currency forward contracts are classified under Level 2 of the fair value hierarchy (see Note 17).
The following table summarizes the location of net gains and losses in the consolidated statements of operations that were recognized during the years ended December 31, 2022, 2021 and 2020, in addition to the derivative contract type (in millions):
Amount of Net Gain Recognized in Income on Derivative Instruments
Derivatives not designated as hedging instrumentsLocation of Net Gain Recognized in Income on Derivative InstrumentsYears Ended December 31,
202220212020
Foreign currency forward contractsOther income, net$44.5 $14.4 $2.2 
During the years ended December 31, 2022, 2021 and 2020, the Company recognized net foreign currency transactional losses of $18.3 million and $6.4 million, and a net foreign currency transactional gain of $9.0 million, respectively, in its consolidated statements of operations.