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Derivatives | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | 9. Derivatives. General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of the risks attributable to those fluctuations by entering into derivative contracts. The derivatives we use are interest rate swaps and foreign currency forward contracts. We recognize derivatives as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative contracts are classified as operating activities in the accompanying consolidated statements of cash flows. ​ We formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment initially and on an ongoing basis. For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income, a component of stockholders’ equity in the accompanying consolidated balance sheets, and recognized in earnings at the same time the hedged item affects earnings. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings throughout the term of the derivative. ​ Interest Rate Risk. Our debt bears interest at variable interest rates. Therefore, we are subject to variability in the cash payable for interest expense. In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Third Amended Credit Agreement that varies in accordance with changes in the benchmark interest rate. Derivative Instruments Designated as Cash Flow Hedges ​ On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $175 million with Wells Fargo to fix the one-month LIBOR rate at 1.12%. The variable portion of the interest rate swap was tied to the one-month LIBOR rate (the benchmark interest rate). The interest rate swap expired on July 6, 2021. On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $75 million with Wells Fargo to fix the one-month LIBOR rate at 1.71% for the period from July 6, 2021 to July 31, 2024. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. On September 30, 2021 and December 31, 2020, our interest rate swaps qualified as cash flow hedges. The fair value of our interest rate swap on September 30, 2021 was a liability of approximately $2.5 million, which was partially offset by approximately $0.6 million in deferred taxes. The fair value of our interest rate swaps on December 31, 2020 was a liability of $4.4 million, partially offset by approximately $1.1 million in deferred taxes. Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years. We are exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in Chinese Renminbi, Euros, British Pounds, Mexican Pesos, Brazilian Reals, Australian Dollars, Hong Kong Dollars, Swiss Francs, Swedish Krona, Canadian Dollars, Danish Krone, Japanese Yen, and South Korean Won, among others. We do not use derivative financial instruments for trading or speculative purposes. We do not believe we are subject to any credit risk contingent features related to our derivative contracts, and we seek to manage counterparty risk by allocating derivative contracts among several major financial institutions. Derivative Instruments Designated as Cash Flow Hedges ​ For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is temporarily reported as a component of other comprehensive income (loss) and then reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. We entered into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the associated foreign currencies. We enter into approximately 150 cash flow foreign currency hedges every month. As of September 30, 2021 and December 31, 2020, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of approximately $124.0 million and $168.2 million, respectively. Derivative Instruments Not Designated as Cash Flow Hedges ​ We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 20 foreign currency fair value hedges every month. As of September 30, 2021 and December 31, 2020, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of approximately $92.1 million and $74.8 million, respectively. Balance Sheet Presentation of Derivative Instruments. As of September 30, 2021 and December 31, 2020, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets. We are not subject to any master netting agreements. The fair value of derivative instruments on a gross basis was as follows on the dates indicated (in thousands): ​
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Fair Value of Derivative Instruments Designated as Hedging Instruments |  | Balance Sheet Location |  | September 30, 2021 |  | December 31, 2020
Assets |  |  |  | ​ |  |  | ​ |
Foreign currency forward contracts |  | Prepaid expenses and other assets | ​ | $ | 1,237 | ​ | $ | 1,777
Foreign currency forward contracts |  | Other assets (long-term) | ​ |  | 236 | ​ |  | 424
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(Liabilities) |  |  | ​ |  |  | ​ |  |
Interest rate swaps | ​ | Accrued expenses | ​ | ​ | — | ​ | ​ | (896)
Interest rate swaps | ​ | Other long-term obligations | ​ | ​ | (2,540) | ​ | ​ | (3,462)
Foreign currency forward contracts |  | Accrued expenses | ​ |  | (1,779) | ​ |  | (5,281)
Foreign currency forward contracts |  | Other long-term obligations | ​ |  | (260) | ​ |  | (866)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair Value of Derivative Instruments Not Designated as Hedging Instruments |  | Balance Sheet Location |  | September 30, 2021 |  | December 31, 2020
Assets |  |  | ​ |  |  | ​ |  |
Foreign currency forward contracts |  | Prepaid expenses and other assets | ​ | $ | 966 | ​ | $ | 877
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(Liabilities) |  |  | ​ |  |  | ​ |  |
Foreign currency forward contracts |  | Accrued expenses | ​ |  | (1,054) | ​ |  | (2,120)
​ Income Statement Presentation of Derivative Instruments. ​ Derivative Instruments Designated as Cash Flow Hedges ​ Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income (“OCI”), accumulated other comprehensive income (“AOCI”), and net earnings in our consolidated statements of income (loss), consolidated statements of comprehensive income (loss) and consolidated balance sheets (in thousands):
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​ | ​ | Amount of Gain/(Loss) | ​ | ​ | ​ | Consolidated Statements | ​ | Amount of Gain/(Loss)
​ | ​ | Recognized in OCI | ​ | ​ | ​ | of Income (Loss) | ​ | Reclassified from AOCI
​ | ​ | Three Months Ended September 30, |  | ​ |  | Three Months Ended September 30, | ​ | Three Months Ended September 30,
Derivative instrument |  | 2021 |  | 2020 |  | Location in statements of income |  | 2021 |  |  | 2020 |  | 2021 |  |  | 2020
Interest rate swaps | ​ | $ | (18) | ​ | $ | (30) | ​ | Interest expense | ​ | $ | (1,233) | ​ | $ | (2,197) | ​ | $ | (319) | ​ | $ | (425)
Foreign currency forward contracts | ​ |  | 33 | ​ |  | (1,324) | ​ | Revenue | ​ |  | 267,021 | ​ |  | 243,975 | ​ |  | (1,500) | ​ |  | 157
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Cost of sales | ​ |  | (146,527) | ​ |  | (141,961) | ​ |  | 312 | ​ |  | (494)
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​ | ​ | Amount of Gain/(Loss) | ​ | ​ | ​ | Consolidated Statements | ​ | Amount of Gain/(Loss)
​ | ​ | Recognized in OCI | ​ | ​ | ​ | of Income (Loss) | ​ | Reclassified from AOCI
​ | ​ | Nine Months Ended September 30, |  | ​ | ​ | Nine Months Ended September 30, | ​ | Nine Months Ended September 30,
Derivative instrument |  | 2021 |  | 2020 |  | Location in statements of income |  | 2021 |  | ​ | 2020 |  | 2021 |  |  | 2020
Interest rate swaps | ​ | $ | 619 | ​ | $ | (6,256) | ​ | Interest expense | ​ | $ | (4,156) | ​ | $ | (8,056) | ​ | $ | (1,198) | ​ | $ | (439)
Foreign currency forward contracts | ​ |  | (83) | ​ |  | (2,596) | ​ | Revenue | ​ |  | 796,259 | ​ |  | 705,871 | ​ |  | (4,674) | ​ |  | 666
​ | ​ | ​ | ​ | Cost of sales | ​ |  | (439,732) | ​ |  | (415,857) | ​ |  | 966 | ​ |  | (1,204)
​ As of September 30, 2021, approximately ($1.2) million, or ($0.9) million after taxes, was expected to be reclassified from accumulated other comprehensive income (loss) to earnings in revenue and cost of sales over the succeeding twelve months. As of September 30, 2021, approximately ($1.2) million, or ($0.9) million after taxes, was expected to be reclassified from accumulated other comprehensive income (loss) to earnings in interest expense over the succeeding twelve months. Derivative Instruments Not Designated as Hedging Instruments ​ The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income (loss) for the periods presented (in thousands): ​
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​ |  | ​ |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Derivative Instrument |  | Location in statements of income (loss) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Foreign currency forward contracts |  | Other income (expense) | ​ | $ | 39 | ​ | $ | (1,294) | ​ | $ | (709) | ​ | $ | 1,051
​

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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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