DERIVATIVES

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

DERIVATIVES

The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business.  Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the six months ended June 30, 2020 and 2019.

The Company is subject to the credit risk of the counterparties to derivative instruments.  Counterparties include a number of major banks and financial institutions.  None of the concentrations of risk with any individual counterparty was considered significant at June 30, 2020.  The Company does not expect any counterparties to fail to meet their obligations.

Cash Flow Hedges

Certain foreign currency forward contracts were qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $66,201 at June 30, 2020 and $59,982 at December 31, 2019.

During March and April 2020, in anticipation of future debt issuance associated with the Notes, referenced in Note 12, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates. The forward starting swap agreements were qualified and designated as a cash flow hedge. The changes in fair value are recorded as part of AOCI, and upon completion of debt issuance and termination of the swaps, are amortized to interest expense over the life of the underlying debt. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at June 30, 2020 and have a termination date of August 2025.

Fair Value Hedges

From time to time the company will enter into certain interest rate swap agreements that are qualified and designated as fair value hedges. At June 30, 2020, the Company had no interest rate swap agreements outstanding. The Company terminated $50,000 of interest rate swaps in the six months ended June 30, 2020 which resulted in a gain of $6,629 that will be amortized to interest expense over the remaining life of the underlying debt.

Net Investment Hedges

The Company has cross currency swap agreements that are qualified and designated as net investment hedges. The dollar equivalent gross notional amount of these contracts is $50,000 as of June 30, 2020 and December 31, 2019, respectively.

Derivatives Not Designated as Hedging Instruments

The Company has certain foreign exchange forward contracts that are not designated as hedges.  These derivatives are held as economic hedges of certain balance sheet exposures.  The dollar equivalent gross notional amount of these contracts was $375,396 and $363,820 at June 30, 2020 and December 31, 2019, respectively.

Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow:

	June 30, 2020								December 31, 2019
Derivatives by hedge designation	Other Current Assets		Other Current Liabilities		Other Assets		Other Liabilities		Other Current Assets		Other Current Liabilities		Other Assets		Other Liabilities
Designated as hedging instruments:
Foreign exchange contracts	$	567	$	2,886	$	—	$	—	$	1,288	$	522	$	—	$	—
Interest rate swap agreements	—		—		—		—		—		—		2,964		—
Forward starting swap agreements	—		—		312		87		—		—		—		—
Cross currency swap agreements	—		—		469		—		—		—		—		653
Not designated as hedging instruments:
Foreign exchange contracts	1,541		3,236		—		—		2,397		973		—		—
Total derivatives	$	2,108	$	6,122	$	781	$	87	$	3,685	$	1,495	$	2,964	$	653

The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income consisted of the following:

		Three Months Ended June 30,				Six Months Ended June 30,
Derivatives by hedge designation	Classification of gain (loss)	2020		2019		2020			2019
Foreign exchange contracts	Selling, general & administrative expenses	$	3,624	$	1,010	$	(18,509	)	$	6,417

The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following:

Total gain (loss) recognized in AOCI, net of tax	June 30, 2020			December 31, 2019
Foreign exchange contracts	$	(1,778	)	$	620
Forward starting swap agreements	257			—
Net investment contracts	1,886			1,006

The Company expects a loss of $1,778 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized. 

		Three Months Ended June 30,					Six Months Ended June 30,
Derivative type	Gain (loss) recognized in the Consolidated Statements of Income:	2020			2019		2020			2019
Foreign exchange contracts	Sales	$	(1,463	)	$	387	$	(1,525	)	$	775
	Cost of goods sold	146			152		268			249