We enter into derivative instruments for risk management purposes only. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We use forward contracts, a type of derivative instrument, to manage certain foreign currency exposures.

By nature, all financial instruments involve market and credit risks. We enter into forward contracts with major investment grade financial institutions and have policies to monitor the credit risk of those counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.

Foreign Currency Forward Contracts. We hedge forecasted intercompany sales denominated in foreign currencies through the use of forward contracts. We account for these forward contracts as cash flow hedges. To the extent these forward contracts meet hedge accounting criteria, changes in their fair value are not included in current earnings but are included in accumulated other comprehensive loss. These changes in fair value will be recognized into earnings as a component of sales or cost of sales when the forecasted transaction occurs.

We also enter into forward contracts to exchange foreign currencies for United States dollars in order to hedge our currency transaction exposures on intercompany receivables designated in foreign currencies. These forward contracts settle each month at month-end, at which time we enter into new forward contracts. We have not designated these forward contracts as hedges and have not applied hedge accounting to them.

Foreign exchange contracts designated as cash flow hedges had the following effects on accumulated other comprehensive income (loss) ("AOCI") and net earnings on our consolidated condensed statements of comprehensive income and our consolidated condensed balance sheets:


	Amount of Gain (Loss) Recognized in AOCI				Consolidated Condensed Statements of Comprehensive Income					Amount of Gain Reclassified from AOCI
	Three Months Ended June 30,
						Total Amount of Line Item Presented
Derivative Instrument	2024		2023		Location of amount reclassified	2024		2023		2024		2023

Foreign exchange contracts	$	(499)	$	2,753	Net Sales	$	332,097	$	317,652	$	1,349	$	915
					Cost of Sales	148,368		146,962		626		1,175
Pre-tax gain (loss)	$	(499)	$	2,753						$	1,975	$	2,090
Tax expense (benefit)	(121)		667							479		507
Net gain (loss)	$	(378)	$	2,086						$	1,496	$	1,583


	Amount of Gain Recognized in AOCI				Consolidated Condensed Statements of Comprehensive Income					Amount of Gain Reclassified from AOCI
	Six Months Ended June 30,
						Total Amount of Line Item Presented
Derivative Instrument	2024		2023		Location of amount reclassified	2024		2023		2024		2023

Foreign exchange contracts	$	6,759	$	5,291	Net Sales	$	644,371	$	613,121	$	1,990	$	1,490
					Cost of Sales	288,677		287,110		1,372		1,981
Pre-tax gain	$	6,759	$	5,291						$	3,362	$	3,471
Tax expense	1,639		1,281							815		842
Net gain	$	5,120	$	4,010						$	2,547	$	2,629

.

At June 30, 2024, $2.6 million of net unrealized gains on forward contracts accounted for as cash flow hedges, and included in accumulated other comprehensive loss, are expected to be recognized in earnings in the next twelve months.


		Three Months Ended June 30,				Six Months Ended June 30,
Derivative Instrument	Location on Consolidated Condensed Statements of Comprehensive Income	2024		2023		2024		2023

Net gain on currency forward contracts	Selling and administrative expense	$	211	$	768	$	882	$	403
Net loss on currency transaction exposures	Selling and administrative expense	$	(965)	$	(1,355)	$	(2,210)	$	(1,279)


June 30, 2024	Location on Consolidated Condensed Balance Sheet	Asset Fair Value		Liabilities Fair Value		Net Fair Value
Derivatives designated as hedged instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	4,677	$	(1,258)	$	3,419
Foreign exchange contracts	Other assets	824		(692)		132
		$	5,501	$	(1,950)	$	3,551

Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current liabilities	7		(214)		(207)

Total derivatives		$	5,508	$	(2,164)	$	3,344


December 31, 2023	Location on Consolidated Condensed Balance Sheet	Asset Fair Value		Liabilities Fair Value		Net Fair Value
Derivatives designated as hedged instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	3,761	$	(3,197)	$	564
Foreign exchange contracts	Other long-term liabilities	24		(433)		(409)
		$	3,785	$	(3,630)	$	155

Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current liabilities	39		(209)		(170)

Total derivatives		$	3,824	$	(3,839)	$	(15)

Fair Value Disclosure. FASB guidance defines fair value and establishes a framework for measuring fair value and related disclosure requirements. This guidance applies when fair value measurements are required or permitted. The guidance indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Fair value is defined based upon an exit price model.

Valuation Hierarchy. A valuation hierarchy was established for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no significant changes in the assumptions.

Valuation Techniques. Assets and liabilities carried at fair value and measured on a recurring basis as of June 30, 2024 consist of forward foreign exchange contracts and contingent consideration. The Company values its forward foreign exchange contracts using quoted prices for similar assets. The most significant assumption is quoted currency rates. The value of the forward foreign exchange contract assets and liabilities were valued using Level 2 inputs and are listed in the table above.

The Company values contingent consideration from the In2Bones, Global Inc. ("In2Bones") and Biorez, Inc. ("Biorez") acquisitions using Level 3 inputs. The contingent consideration was recorded at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present value. The fair value of contingent consideration is measured using projected payment dates, discount rates, revenue volatilities and projected revenues. The recurring Level 3 fair value measurements of contingent consideration for which the liabilities are recorded include the following significant unobservable inputs as of June 30, 2024:

Adjustments to the fair value of contingent consideration for In2Bones were driven by a delayed recovery from supply chain constraints, delays in product registrations and integration disruptions. Biorez adjustments to fair value of contingent consideration relate to the passage of time and changes in market assumptions. Changes in the fair value of contingent consideration liabilities for the six months ended June 30, 2024 and 2023 are as follows:


	In2Bones				Biorez
	2024		2023		2024		2023
Balance as of January 1,	$	41,393	$	70,198	$	128,751	$	116,234

Payments	(3,028)		—		(36,401)		—
Changes in fair value of contingent consideration	(20,760)		136		5,541		3,663

Balance as of June 30,	$	17,605	$	70,334	$	97,891	$	119,897

Contingent consideration of $36.9 million and $78.6 million is included in other current liabilities and other long-term liabilities, respectively, in the consolidated condensed balance sheet at June 30, 2024. Contingent consideration of $77.6 million and $92.5 million is included in other current liabilities and other long-term liabilities, respectively, in the consolidated condensed balance sheet at December 31, 2023.