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DERIVATIVES | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the nine months ended September 30, 2020 and 2019. The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered significant at September 30, 2020. The Company does not expect any counterparties to fail to meet their obligations. Cash Flow Hedges Certain foreign currency forward contracts were qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $66,566 at September 30, 2020 and $59,982 at December 31, 2019. During March and April 2020, in anticipation of future debt issuance associated with the Notes referenced in Note 12, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates. The forward starting swap agreements were qualified and designated as a cash flow hedge. The changes in fair value are recorded as part of AOCI, and upon completion of debt issuance and termination of the swaps, are amortized to interest expense over the life of the underlying debt. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at September 30, 2020 and have a termination date of August 2025. Fair Value Hedges From time to time the company will enter into certain interest rate swap agreements that are qualified and designated as fair value hedges. At September 30, 2020, the Company had no interest rate swap agreements outstanding. The Company terminated $50,000 of interest rate swaps in the nine months ended September 30, 2020, which resulted in a gain of $6,629 that will be amortized to interest expense over the remaining life of the underlying debt. Net Investment Hedges The Company has cross currency swap agreements that are qualified and designated as net investment hedges. The dollar equivalent gross notional amount of these contracts is $50,000 as of September 30, 2020 and December 31, 2019, respectively. Derivatives Not Designated as Hedging Instruments The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $390,926 and $363,820 at September 30, 2020 and December 31, 2019, respectively. Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow:
|  | September 30, 2020 |  |  |  |  |  |  |  | December 31, 2019 |  |  |  |  |  |
Derivatives by hedge designation |  | Other Current Assets |  | Other Current Liabilities |  | Other Assets |  | Other Liabilities |  | Other Current Assets |  | Other Current Liabilities |  | Other Assets |  | Other Liabilities
Designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 1,034 |  |  | $ | 1,476 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,288 |  |  | $ | 522 |  |  | $ | — |  |  | $ | — |
Interest rate swap agreements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,964 |  |  | — |
Forward starting swap agreements |  | — |  |  | — |  |  | 1,876 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cross currency swap agreements |  | — |  |  | — |  |  | — |  |  | 1,877 |  |  | — |  |  | — |  |  | — |  |  | 653 |
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 3,067 |  |  | 2,872 |  |  | — |  |  | — |  |  | 2,397 |  |  | 973 |  |  | — |  |  | — |
Total derivatives |  | $ | 4,101 |  |  | $ | 4,348 |  |  | $ | 1,876 |  |  | $ | 1,877 |  |  | $ | 3,685 |  |  | $ | 1,495 |  |  | $ | 2,964 |  |  | $ | 653 |
The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income consisted of the following:
|  |  |  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
Derivatives by hedge designation |  | Classification of gain (loss) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Foreign exchange contracts |  | Selling, general & administrative expenses |  | $ | 6,381 |  |  | $ | (710) |  |  | $ | (12,141) |  |  | $ | 5,707 |
The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following:
Total gain (loss) recognized in AOCI, net of tax |  | September 30, 2020 |  | December 31, 2019
Foreign exchange contracts |  | $ | (468) |  |  | $ | 620 |
Forward starting swap agreements |  | 1,407 |  |  | — |
Net investment contracts |  | 65 |  |  | 1,006 |
The Company expects a loss of $468 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.
|  |  |  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
Derivative type |  | Gain (loss) recognized in the Consolidated Statements of Income: |  | 2020 |  | 2019 |  | 2020 |  | 2019
Foreign exchange contracts |  | Sales |  | $ | (756) |  |  | $ | (15) |  |  | $ | (2,281) |  |  | $ | 760 |
|  | Cost of goods sold |  | (200) |  |  | 117 |  |  | 67 |  |  | 366 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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