XML 42 R25.htm IDEA: XBRL DOCUMENT

DERIVATIVES

3 Months Ended

Mar. 31, 2021

NOTE 16 — 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 three months ended March 31, 2021 and 2020.

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 March 31, 2021. 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 $67,654 at March 31, 2021 and $69,051 at December 31, 2020.

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 March 31, 2021 and December 31, 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 March 31, 2021, the Company had no interest rate swap agreements outstanding. The Company terminated $50,000 of interest rate swaps in the three months ended March 31, 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 March 31, 2021 and December 31, 2020, 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 $585,340 and $391,112 at March 31, 2021 and December 31, 2020, respectively.

Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow:


	March 31, 2021								December 31, 2020
	Other		Other						Other		Other
	Current		Current		Other		Other		Current		Current		Other		Other
Derivatives by hedge designation	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Designated as hedging instruments:
Foreign exchange contracts	$	1,337	$	1,090	$	—	$	—	$	2,451	$	1,124	$	—	$	—
Forward starting swap agreements		—		—		13,510		—		—		—		4,876		—
Cross currency swap agreements		—		—		—		2,263		—		—		—		4,308
Not designated as hedging instruments:
Foreign exchange contracts		2,715		1,682		—		—		1,398		3,485		—		—
Total derivatives	$	4,052	$	2,772	$	13,510	$	2,263	$	3,849	$	4,609	$	4,876	$	4,308

The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income consisted of the following:


		Three Months Ended March 31,
Derivatives by hedge designation	Classification of gain (loss)	2021		2020
Not designated as hedges:
Foreign exchange contracts	Selling, general & administrative expenses	$	(1,286)	$	(22,133)

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	March 31, 2021		December 31, 2020
Foreign exchange contracts	$	(90)	$	660
Forward starting swap agreements		10,109		3,649
Net investment contracts		(242)		(1,822)

The Company expects a loss of $90 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 March 31,
	Gain (loss) recognized in the
Derivative type	Consolidated Statements of Income:	2021		2020
Foreign exchange contracts	Sales	$	144	$	(62)
	Cost of goods sold		(458)		122