Item 7A. Quantitative and Qualitative Disclosures About Market Risk

(dollars in millions)

The Company, in the normal course of doing business, is exposed to a variety of risks, including market risks associated with foreign currency exchange rates and changes in interest rates. The Company does not have any significant concentration with any one counterparty.

Foreign Currency Exchange Rate Risk

The Company conducts business in many international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Company’s sales, operating margins and equity. The Company attempts to manage currency exposure risk in a number of ways including producing its products in the same country or region in which the products are sold (thereby generating revenues and incurring expenses in the same currency), cost reduction and pricing actions, and working capital management. However, there can be no assurance that these actions will be fully effective in managing currency risk, including in the event of a significant and sudden decline in the value of any of the international currencies of the Company’s worldwide operations.

As of December 31, 2017, the Company had six forward contracts of varying amounts that effectively fixed Euro, Great Britain Pound and Korean Won intercompany debt obligations into fixed Hong Kong dollar denominated obligations expiring at various times through 2018 concurrent with the underlying intercompany loans. The fair value of the contracts at December 31, 2017 resulted in a net asset of $2.3. A 10% change in foreign currency exchange rates would not have a material effect on the value of the hedges as of December 31, 2017 and 2016. The Company does not engage in purchasing forward contracts for trading or speculative purposes.

Refer to Note 3 of the Notes to the Consolidated Financial Statements for a discussion of derivative financial instruments.

Interest Rate Risk

The Company is subject to market risk from exposure to changes in interest rates based on the Company’s financing activities. The Company manages its exposure to interest rate risk through a mix of fixed and variable rate debt. In April 2017, the Company issued $400.0 principal amount of unsecured 2.20% senior notes due April 2020 and $350.0 principal amount of unsecured 3.20% senior notes due April 2024. The Company used all of the net proceeds to repay the outstanding 1.55% senior notes of $375.0 that was due in September 2017 as well as for general corporate purposes.

Any borrowings under the Revolving Credit Facility either bear interest at or trade at rates that fluctuate with a spread over LIBOR, while any borrowings under the Commercial Paper Program are subject to floating interest rates. Therefore, when the Company borrows under these debt instruments, the Company is exposed to market risk related to changes in interest rates. As of December 31, 2017, $1,182.0, or 33%, of the Company’s outstanding borrowings, which related mainly to its Commercial Paper Program, were subject to floating interest rates. At December 31, 2017 and 2016, the Company’s average floating rate on such borrowings was 1.71% and 1.06%, respectively. A 10% change in this interest rate at December 31, 2017 and 2016 would not have a material effect on interest expense. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2018, although there can be no assurances that interest rates will not change significantly.