Derivative Instruments and Hedges

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Our risk management and foreign currency derivatives and hedging policy specifies the conditions under which we may enter into derivative contracts. See Notes 1 and 9 to our consolidated financial statements included in our 2020 Annual Report and Note 8 of this Quarterly Report for additional information on our derivatives. We enter into foreign exchange forward contracts to hedge our cash flow risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction.

Foreign exchange contracts with third parties had a notional value of $371.3 million and $388.1 million at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, the length of foreign exchange contracts currently in place ranged from 6 days to 17 months.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under foreign exchange contracts agreements and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties.

The fair values of foreign exchange contracts are summarized below:


	March 31,		December 31,
(Amounts in thousands)	2021		2020
Current derivative assets	$	2,416	$	2,857
Noncurrent derivative assets	17		249
Current derivative liabilities	1,665		682
Noncurrent derivative liabilities	2		—

Current and noncurrent derivative assets are reported in our condensed consolidated balance sheets in prepaid expenses and other and other assets, net, respectively. Current and noncurrent derivative liabilities are reported in our condensed consolidated balance sheets in accrued liabilities and retirement obligations and other liabilities, respectively.

The impact of net changes in the fair values of foreign exchange contracts are summarized below:


	Three Months Ended March 31,
(Amounts in thousands)		2021		2020
Gains recognized in income		$	6,105	$	3,459

Gains and losses recognized in our condensed consolidated statements of income for foreign exchange contracts are classified as other income (expense), net.

As a means of managing the volatility of foreign currency exposure with the Euro/U.S. dollar exchange rate, we enter into cross-currency swaps agreements ("Swaps") as a hedge of our Euro investment in certain of our international subsidiaries. Accordingly, on March 9, 2021 we entered into a cross currency swap agreement with an early termination date of March 9, 2025 and during the third quarter of 2020 we entered into a cross currency swap agreement with an early termination date of September 22, 2025. Both swap agreements are designated as net investment hedges. As of March 31, 2021, the combined notional value of these swaps was €288.2 million. The swaps are included in retirement obligations and other liabilities in our condensed consolidated balance sheet as of March 31, 2021, with a fair value of $(18.3) million, compared to $(18.1) million as of December 31, 2020. The swaps are classified as Level II under the fair value hierarchy.

We exclude the interest accruals on the swaps from the assessment of hedge effectiveness and recognize the interest accruals in earnings within interest expense. For each reporting period, the change in the fair value of the swaps attributable to changes in the spot rate and differences between the change in the fair value of the excluded components and the amounts recognized in earnings under the swap accrual process are reported in accumulated other comprehensive loss on our consolidated balance sheet. For the period ending March 31, 2021, an interest accrual of $(0.6) million was recognized within interest expense, in our condensed consolidated statements of income.

The cumulative net investment hedge loss, net of deferred taxes, under cross-currency swaps recorded in accumulated other comprehensive loss (gain) ("AOCL") on our condensed consolidated balance sheet are summarized below:


	March 31,
	2021		2020
	(Amounts in thousands)
Gain-included component (1)	$	(1,613)	$	—
Loss-excluded component (2)	15,639		—
Loss recognized in AOCL	$	14,026	$	—

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(1) Change in the fair value of the swaps attributable to changes in spot rates.

(2) Change in the fair value of the swaps due to changes other than those attributable to spot rates.

In March 2015, we designated €255.7 million of our 1.25% EUR 2022 Senior Notes ("2022 Euro Senior Notes") discussed in Note 7 as a net investment hedge of our Euro investment in certain of our international subsidiaries. On September 22, 2020, we increased the designated hedged value on the 2022 Euro Senior Notes to €336.3 million, which reflected the remaining balance of the 2022 Euro Senior Notes. For each reporting period, the change in the carrying value due to the remeasurement of the effective portion is reported in accumulated other comprehensive loss on our consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other income (expense), net in our

condensed consolidated statements of income. As a result of the redemption of our 2022 Euro Senior Notes discussed in Note 7, in February and March of 2021 we dedesignated the hedged value of our net investment hedge.

Prior to the dedesignation, the cumulative impact recorded in AOCL on our consolidated balance sheet from the change in carrying value due to the remeasurement of the effective portion of the net investment hedge are summarized below:


	March 31,
	2021		2020
	(Amounts in thousands)
Loss recognized in AOCL	$	29,554	$	8,520

Prior to the dedesignation of the net investment hedge, we used the spot method to measure the effectiveness of both net investment hedges and evaluate the effectiveness on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness during the three months ended March 31, 2021 and 2020.