Derivatives

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

The Company has manufacturing and sales facilities around the world and thus makes investments and conducts business transactions denominated in various currencies. The Company is also exposed to fluctuations in interest rates and commodity price changes. These financial exposures are monitored and managed by the Company as an integral part of its risk management program.

Financial instruments have been used by the Company to hedge its exposure to fluctuations in interest rates. The Company entered into an interest rate swap agreement (the "Swap") on April 28, 2017, with one bank, which converts the interest on the first $100,000 of the Company's one-month LIBOR-based borrowings from a variable rate plus the borrowing spread to a fixed rate of 1.92% plus the borrowing spread. The Swap expires on January 31, 2022 and is accounted for as a cash flow hedge.

The Company also uses financial instruments to hedge its exposures to fluctuations in foreign currency exchange rates. The Company has various contracts outstanding which primarily hedge recognized assets or liabilities and anticipated transactions in various currencies including the Euro, British pound sterling, U.S. dollar, Canadian dollar, Japanese yen, Singapore dollar, Korean won, Swedish kroner, Chinese renminbi, Mexican peso, Hong Kong dollar and Swiss franc. Certain foreign currency

derivative instruments are treated as cash flow hedges of forecasted transactions. All foreign exchange contracts are due within two years.

The Company does not use derivatives for speculative or trading purposes or to manage commodity exposures. Changes in the fair market value of derivatives that qualify as cash flow hedges are recorded to accumulated other non-owner changes to equity. Amounts recorded to accumulated other non-owner changes to equity are reclassified to earnings in a manner that matches the earnings impact of the hedged transaction. Amounts related to contracts that are not designated as hedges are recorded directly to earnings.

The Company's policy for classifying cash flows from derivatives is to report the cash flows consistent with the underlying hedged item. Other financing cash flows during the first nine months of 2019 and 2018, as presented on the Consolidated Statements of Cash Flows, include $12,593 and $3,291, respectively, of net cash payments related to the settlement of foreign currency hedges related to intercompany financing.

The following table sets forth the fair value amounts of derivative instruments held by the Company:

	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
	Balance Sheet Location	September 30, 2019		December 31, 2018		Balance Sheet Location	September 30, 2019			December 31, 2018
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	—	$	1,412	Other liabilities	$	(1,011	)	$	—
Foreign exchange contracts	Prepaid expenses and other current assets	—		—		Accrued liabilities	(402		)	(258		)
Total derivatives designated as hedging instruments		—		1,412			(1,413		)	(258		)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	25		1,105		Accrued liabilities	(227		)	(90		)
Total derivatives not designated as hedging instruments		25		1,105			(227		)	(90		)
Total derivatives		$	25	$	2,517		$	(1,640	)	$	(348	)

The following table sets forth the effect of hedge accounting on accumulated other comprehensive (loss) income for the three and nine month periods ended September 30, 2019 and 2018:

	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative											Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
	Three Months Ended September 30,					Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives in Hedging Relationships	2019			2018		2019			2018				2019			2018			2019			2018
Derivatives in Cash Flow Hedging Relationships:
Interest rate contracts	$	(178	)	$	378	$	(1,846	)	$	2,064		Interest expense	$	86		$	40		$	367		$	(374	)
Foreign exchange contracts	10			697		(114		)	(178		)	Net sales	(199		)	(326		)	(788		)	(859		)
Total	$	(168	)	$	1,075	$	(1,960	)	$	1,886			$	(113	)	$	(286	)	$	(421	)	$	(1,233	)

The following table sets forth the effect of hedge accounting on the consolidated statements of income for the three-month periods ended September 30, 2019 and 2018:

	Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
	Three Months Ended September 30,
	2019					2018
	Net sales			Interest expense		Net sales		Interest expense
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of hedges are recorded	$	372,587		$	5,344	$	369,797	$	4,054
The effects of hedging:
Gain (Loss) on cash flow hedging relationships
Interest rate contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income				86				40
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income	(199		)					(326		)

The following table sets forth the effect of hedge accounting on the consolidated statements of income for the nine-month periods ended September 30, 2019 and 2018:

	Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
	Nine Months Ended September 30,
	2019					2018
	Net sales			Interest expense		Net sales		Interest expense
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of hedges are recorded	$	1,120,947		$	15,856	$	1,111,772	$	12,078
The effects of hedging:
Gain (Loss) on cash flow hedging relationships
Interest rate contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income				367				(374		)
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income	(788		)					(859		)

The following table sets forth the effect of derivatives not designated as hedging instruments on the consolidated statements of income for the three and nine-month periods ended September 30, 2019 and 2018:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative(A)
		Three Months Ended September 30,					Nine Months Ended September 30,
Derivatives Not Designated as Hedging Instruments		2019			2018		2019			2018
Foreign exchange contracts	Other expense (income), net	$	(11,662	)	$	1,380	$	(15,182	)	$	(6,218	)

(A) Such amounts were substantially offset by the net (gain) loss recorded on the underlying hedged asset or liability, also recorded in other expense (income), net.