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DERIVATIVES

9 Months Ended

Sep. 30, 2022

DERIVATIVES

DERIVATIVES

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 nine months ended September 30, 2022 and 2021.

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, 2022. The Company does not expect any counterparties to fail to meet their obligations.

Cash Flow Hedges

The Company has certain foreign currency forward contracts that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $54,600 at September 30, 2022 and $72,630 at December 31, 2021.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at September 30, 2022 and December 31, 2021 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 1,475,000 pounds and 975,000 pounds at September 30, 2022 and December 31, 2021, respectively, which are qualified and designated as cash flow hedges.

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 $25,000 as of September 30, 2022 and December 31, 2021, respectively.

The Company has foreign currency forward contracts that qualify and are designated as net investment hedges. The dollar equivalent gross notional amount of these short-term contracts was $81,398 at September 30, 2022 and $94,479 at December 31, 2021.

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 $260,594 and $301,685 at September 30, 2022 and December 31, 2021, respectively.

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


	September 30, 2022												December 31, 2021
	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	$	2,039		$	508		$	—		$	—		$	772		$	535		$	—		$	—
Forward starting swap agreements		—			—			19,479			—			—			—			6,990			—
Net investment contracts		13,394			—			2,718			—			2,095			—			—			608
Commodity contracts		—			547			—			—			311			—			—			—
Not designated as hedging instruments:
Foreign exchange contracts		1,684			3,394			—			—			4,656			3,445			—			—
Total derivatives	$	17,117		$	4,449		$	22,197		$	—		$	7,834		$	3,980		$	6,990		$	608

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)		2022			2021			2022			2021
Not designated as hedges:
Foreign exchange contracts		Selling, general & administrative expenses		$	(3,374)		$	(878)		$	(2,836)		$	5,000
Commodity Contracts		Cost of goods sold			(319)			—			(40)			—

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, 2022			December 31, 2021
Foreign exchange contracts		$	1,325		$	284
Forward starting swap agreements			14,133			5,232
Net investment contracts			15,000			2,339
Commodity Contracts			(282)			239

The Company expects a gain of $1,043 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,
		Gain (loss) recognized in the
Derivative type		Consolidated Statements of Income:		2022			2021			2022			2021
Foreign exchange contracts		Sales		$	229		$	439		$	590		$	2,303
		Cost of goods sold			573			(44)			1,202			(1,018)
Commodity contracts		Cost of goods sold			(319)			—			(40)			—