FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2020

Forward Foreign Exchange and Currency Option Contracts

The Corporation has foreign currency exposure primarily in the United Kingdom, Europe, and Canada. The Corporation uses financial instruments, such as forward and option contracts, to hedge a portion of existing and anticipated foreign currency denominated transactions. The purpose of the Corporation’s foreign currency risk management program is to reduce volatility in earnings caused by exchange rate fluctuations. Guidance on accounting for derivative instruments and hedging activities requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments.

Interest Rate Risks and Related Strategies

The Corporation’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Corporation’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Corporation periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The Corporation’s foreign exchange contracts and interest rate swaps are considered Level 2 instruments which are based on market based inputs or unobservable inputs and corroborated by market data such as quoted prices, interest rates, or yield curves.

Effects on Condensed Consolidated Balance Sheets

As of September 30, 2020 and December 31, 2019, the fair values of the asset and liability derivative instruments were immaterial.

Effects on Condensed Consolidated Statements of Earnings

Undesignated hedges

For the three and nine months ended September 30, 2020 and 2019, the gains or (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting were as follows:


	Three Months Ended				Nine Months Ended
(In thousands)	September 30,				September 30,
Derivatives not designated as hedging instrument	2020		2019		2020		2019
Forward exchange contracts:
General and administrative expenses	$	1,730	$	(1,823)	$	(5,702)	$	(392)

Debt

The estimated fair value amounts were determined by the Corporation using available market information that is primarily based on quoted market prices for the same or similar issuances as of September 30, 2020. Accordingly, all of the Corporation’s debt is valued as a Level 2 financial instrument. The fair values described below may not be indicative of net realizable value or reflective of future fair values. Furthermore, the use of different methodologies to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.


	September 30, 2020				December 31, 2019
(In thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
3.84% Senior notes due 2021	100,000		102,447		100,000		102,079
3.70% Senior notes due 2023	202,500		211,571		202,500		207,882
3.85% Senior notes due 2025	90,000		97,021		90,000		93,838
4.24% Senior notes due 2026	200,000		223,547		200,000		213,126
4.05% Senior notes due 2028	67,500		75,258		67,500		71,260
4.11% Senior notes due 2028	90,000		100,825		90,000		95,607
3.10% Senior notes due 2030	150,000		155,387		—		—
3.20% Senior notes due 2032	150,000		154,622		—		—
Total debt	1,050,000		1,120,678		750,000		783,792
Debt issuance costs, net	(1,180)		(1,180)		(594)		(594)
Unamortized interest rate swap proceeds	9,887		9,887		11,233		11,233
Total debt, net	$	1,058,707	$	1,129,385	$	760,639	$	794,431

On August 13, 2020, the Corporation issued $300 million Senior Notes (the “2020 Notes”), consisting of $150 million 3.10% Senior Notes that mature on August 13, 2030 and $150 million 3.20% Senior Notes that mature on August 13, 2032. The 2020 Notes are senior unsecured obligations, equal in right of payment to the Corporation’s existing senior indebtedness. The Corporation, at its option, can prepay at any time all or any part of the 2020 Notes, subject to a make-whole payment in accordance with the terms of the Note Purchase Agreement.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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