As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions (“cash flow hedges”); ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables (“foreign currency hedges”); or iii) convert variable-interest-rate debt to fixed rates.

Derivatives Designated as Hedging Instruments - Cash Flow Hedges We use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs. Currency forward contracts involve fixing the exchange for delivery of a specified amount of foreign currency on a specified date. As of September 30, 2021, the maturity of currency forward contracts ranged from one month to 18 months.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases, certain production costs or capital expenditures with exposure to changes in foreign currency exchange rates. Changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets. With respect to hedges of forecasted raw material purchases or production costs, the amount deferred is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. For hedged capital expenditures, deferred gains or losses are reclassified and included in the historical cost of the capital asset and subsequently affect earnings as depreciation is recognized.


In thousands	September 30, 2021	December 31, 2020
Derivative
Sell/Buy - sell notional
Philippine Peso / Euro	13,514	18,522
Euro / British Pound	19,318	18,638

U.S. Dollar / British Pound	10,331	—
U.S. Dollar / Euro	1,022	1,041
Canadian Dollar / U.S. Dollar	—	70

Sell/Buy - buy notional
Euro / Philippine Peso	876,006	853,686
British Pound / Philippine Peso	1,149,365	1,081,791
Euro / U.S. Dollar	93,797	69,324
U.S. Dollar / Canadian Dollar	33,345	34,847
British Pound / U.S. Dollar	851	—

In October 2019, we entered into a €180 million notional value floating-to-fixed interest rate swap agreement with certain financial institutions. Under the terms of the swap, we will pay a fixed interest rate of the applicable margin plus 0.0395% on €180 million of the underlying variable rate term loan. We will receive the greater of 0.00% or EURIBOR.

Derivatives Designated as Hedging Instruments – Net Investment Hedge The €220 million Term Loan discussed in Note 16 – “Long-Term Debt” is designated as a net investment hedge of our Euro functional currency foreign subsidiaries. During the first nine months of 2021, we recognized a pre-tax gain of $13.8 million and in the same period of 2020 a pre-tax loss of $9.7 million on the remeasurement of the term loan from changes in currency exchange rates. Such amounts are recorded as a component of Other Comprehensive Income (Loss).

Derivatives Not Designated as Hedging Instruments - Foreign Currency Hedges We also entered into forward foreign exchange contracts to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities. None of these contracts are designated as hedges for financial accounting purposes and, accordingly,

changes in value of the foreign exchange forward contracts and in the offsetting underlying on-balance-sheet transactions are reflected in the accompanying condensed consolidated statements of income under the caption “Other, net.”


In thousands	September 30, 2021	December 31, 2020
Derivative
Sell/Buy - sell notional
U.S. Dollar / British Pound	22,050	25,250
Euro / British Pound	—	600
British Pound / Euro	2,400	1,900
U.S. Dollar / Swiss Franc	1,300	—
British Pound / Swiss Franc	750	—
Euro / Swiss Franc	1,400	—

Sell/Buy - buy notional
Euro / U.S. Dollar	17,200	7,500
British Pound / Euro	1,200	—

Fair Value Measurements The following table summarizes the fair values of derivative instruments for the period indicated and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded:


In thousands	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts	$	2,569	$	577	$	740	$	4,342
Interest rate swap	—		—		98		136

Not designated as hedging:
Forward foreign currency exchange contracts	$	275	$	456	$	572	$	118

The amounts set forth in the table above represent the net asset or liability giving effect to rights of offset with each counterparty. The effect of netting the amounts presented above did not have a material effect on our consolidated financial position.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The fair values of the foreign exchange forward contracts are considered to be Level 2. Foreign currency forward contracts are valued using foreign currency forward and interest rate curves. The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to present value. Contracts in a gain position are recorded in the condensed consolidated balance sheets under the caption “Prepaid expenses and other current assets” and the value of contracts in a loss position is recorded under the caption “Other current liabilities.”

The following table summarizes the amount of income or (loss) from derivative instruments recognized in our results of operations for the periods indicated and the line items in the accompanying condensed consolidated statements of income where the results are recorded:


	Three months ended September 30,				Nine months ended September 30,
In thousands	2021		2020		2021		2020
Designated as hedging:
Forward foreign currency exchange contracts:
Cost of products sold	$	67	$	1,345	$	10	$	5,015
Interest expense	21		—		64		—

Not designated as hedging:
Forward foreign currency exchange contracts:
Other – net	$	(376)	$	1,037	$	327	$	510


In thousands	2021		2020
Balance at January 1,	$	(3,460)	$	5,859
Deferred gains (losses) on cash flow hedges	4,920		(1,435)
Reclassified to earnings	(74)		(5,015)
Balance at September 30,	$	1,386	$	(591)

We expect substantially all of the amounts recorded as a component of accumulated other comprehensive income will be recorded in results of operations within the next 12 to 18 months and the amount ultimately recognized will vary depending on actual market rates.

Credit risk related to derivative activity arises in the event the counterparty fails to meet its obligations to us. This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.