Derivative Financial Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Exchange Rate Risk

The Company enters into foreign currency forward contracts not formally designated as hedges to manage the consolidated exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities. Changes in fair value of foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. In general, these gains and losses are offset in the Consolidated Statements of Income by the reciprocal gains and losses from the underlying assets or liabilities which originally gave rise to the exposure. The net amount of the gains and losses related to derivative instruments recorded in other (income) expense, net for the three and six months ended June 30, 2019 were net losses of $0.6 million and $0.3 million, respectively. The net losses for the three and six month and 2018 were $4.0 million and $8.6 million, respectively.

The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency (in thousands):



	June 30,		December 31,
	2019		2018
European euro	$	71,168	$	61,452
Canadian dollar	19,441		19,685
British pound sterling	11,570		609
Brazilian real	8,518		8,598
Swedish kronor	5,963		3,608
Norwegian kroner	4,295		—
Australian dollar	1,054		1,131
Other	743		813
	$	122,752	$	95,896

At June 30, 2019, the Company’s foreign currency forward contracts, in general, had maturities of three months or less.

Note 6. Derivative Financial Instruments - (Continued)

Foreign Currency Exchange Rate Risk - (Continued)

The carrying amounts of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):



	June 30, 2019				December 31, 2018
	Prepaid Expenses and Other Current Assets		Other Current Liabilities		Prepaid Expenses and Other Current Assets		Other Current Liabilities
Foreign exchange contracts	$	1,690	$	647	$	431	$	951

Interest Rate Swap Contracts

The Company's outstanding debt at June 30, 2019 consists of fixed rate notes and an unsecured credit facility consisting of a revolving loan facility, a U.S. dollar term loan facility and a Swedish kronor term loan facility, all of which accrue interest at a floating rate. As discussed in Note 13, "Credit Agreement," interest expense on the Company's floating rate debt is calculated based on a fixed spread over the applicable Eurocurrency rate (e.g. LIBOR). Therefore, fluctuations in market interest rates will cause interest expense increases or decreases on a given amount of floating rate debt.

The Company is managing its interest rate risk related to certain floating rate debt through a floored amortizing interest rate swap (“floored swap”) in which the Company receives floating rate payments subject to a floor of zero percent and makes fixed rate payments. The impact of the floored swap is to fix the floating rate basis for the calculation of interest on the unsecured Swedish kronor term loan at the levels indicated in the table below. The effective interest rate paid is equal to the fixed rates shown below plus the applicable spread then in effect. At June 30, 2019, the effective interest rate on the Swedish kronor term loan which includes the impact of the floored swap was 1.840 percent.

As of June 30, 2019, the following floored swap was outstanding:

The floored swap is designated and effective as a cash flow hedge with individual swap cash flows recorded as an asset or liability in the Company's Consolidated Balance Sheets at fair value. Fair value adjustments are recorded as an adjustment to accumulated other comprehensive earnings, except that any gains and losses on ineffectiveness of the floored swap would be recorded as an adjustment to other expense (income), net. The net fair value carrying amount of the Company's floored swap was an unrealized loss of $2.1 million, which has been recorded in prepaid expenses and other current assets, other current liabilities and pension and other long-term liabilities in the Consolidated Balance Sheet as of June 30, 2019.

All of the Company's derivative counterparties have investment grade credit ratings. The Company is a party to master netting arrangements that contain features that allow counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. The Company has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions.

Effective Date

Current Notional Amount (in millions Swedish Kronor)

Fixed Rate

Maturity Date

March 29, 2019

March 31, 2024