We are exposed to certain risks arising from operating internationally, including fluctuations in foreign exchange rates primarily related to the translation of our Euro Term Loan and euro denominated net monetary liabilities, including intercompany balances, held by subsidiaries with a U.S. dollar functional currency. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

In order to hedge our exposure to foreign currency exchange risk associated with our Euro Term Loan, we entered into a cross-currency interest rate swap contract in May 2021 with a maturity date of March 31, 2022. The terms of this contract convert the principal repayments and interest payments on our Euro Term Loan into U.S. dollar. As of June 30, 2021, the cross-currency interest rate swap had a notional amount of $753.0 million which is designated for accounting purposes as a fair value hedge. The carrying amount of the Euro Term Loan and the fair value of the cross-currency interest rate swap contract will be remeasured with changes in the euro to U.S. dollar foreign exchange rates recognized within foreign exchange gain (loss) in the condensed consolidated statements of income (loss).

The impact on accumulated other comprehensive income (loss) and earnings from the cross-currency interest rate swap contract for the three months and six months ended June 30, 2021 was as follows (in thousands):


Cross-Currency Interest Rate Contract:	Three and Six Months Ended June 30, 2021
Loss recognized in accumulated other comprehensive income (loss), net of tax	$	(375)

Loss recognized in foreign exchange gain (loss)	(12,365)

During the next 12 months, we expect to reclassify $0.4 million of losses, net of tax, on the cross-currency interest rate contract recognized in accumulated other comprehensive income (loss) to foreign exchange gain (loss).

We also enter into foreign exchange forward contracts, with durations of up to 12 months, designed to limit the exposure to fluctuations in foreign exchange rates related to the translation of certain non-U.S. dollar denominated liabilities, including intercompany balances. Hedge accounting is not applied to these derivative instruments as gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of June 30, 2021 and December 31, 2020, the notional amount of foreign exchange contracts where hedge accounting is not applied was $427.3 million and $357.4 million, respectively.

The foreign exchange gain (loss) in our condensed consolidated statements of income (loss) included the following gains (losses) associated with foreign exchange contracts not designated as hedging instruments (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Foreign Exchange Forward Contracts:	2021		2020		2021		2020
Gain (loss) recognized in foreign exchange gain (loss)	$	3,017	$	3,533	$	(10,033)	$	(2,606)

The cash flow effects of our derivative contracts for the six months ended June 30, 2021 and 2020 are included within net cash provided by operating activities in the condensed consolidated statements of cash flows.

To achieve a desired mix of floating and fixed interest rates on our variable rate debt, we entered into interest rate swap agreements in March 2017 with a maturity date of July 12, 2021. These agreements hedged contractual term loan interest rates. As of June 30, 2021 and December 31, 2020, the interest rate swap agreements had a notional amount of $300.0 million. As a result of these agreements, the interest rate on a portion of our term loan borrowings was fixed at 1.895%, plus the borrowing spread, until July 12, 2021. In May 2021, we repaid the term loan to which these interest rate swap agreements related, at which point the interest rate swap contracts were de-designated as cash flow hedges.

The impact on accumulated other comprehensive income (loss) and earnings from interest rate swap contracts for the three and six months ended June 30, 2021 and 2020 was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Interest Rate Contracts:	2021		2020		2021		2020
Gain (loss) recognized in accumulated other comprehensive income (loss), net of tax	$	2	$	(324)	$	(14)	$	(4,524)
Gain (loss) reclassified from accumulated other comprehensive income (loss) to interest expense, net of tax	1,169		921		2,329		1,068

Assuming no change in London Inter-Bank Offered Rate, or LIBOR, based interest rates from market rates as of June 30, 2021, $0.2 million of losses, net of tax, recognized in accumulated other comprehensive income (loss) will be reclassified to earnings over the period to maturity.

June 30, 2021

Asset Derivatives

Liability Derivatives

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Cross-currency interest rate contracts

Other current assets

—

Accrued liabilities

10,800

Derivatives not designated as hedging instruments:

Foreign exchange forward contracts

Other current assets

1,346

Accrued liabilities

6,509

Interest rate contracts

Other current assets

—

Accrued liabilities

180

Total fair value of derivative instruments

1,346

17,489

December 31, 2020

Asset Derivatives

Liability Derivatives

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments:

Interest rate contracts

Other current assets

—

Accrued liabilities

2,835

Derivatives not designated as hedging instruments:

Foreign exchange forward contracts

Other current assets

11,907

Accrued liabilities

790

Total fair value of derivative instruments

11,907

3,625

Although we do not offset derivative assets and liabilities within our condensed consolidated balance sheets, our International Swap and Derivatives Association agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. The following tables summarize the potential effect on our condensed consolidated balance sheets of offsetting our interest rate contracts and foreign exchange forward contracts subject to such provisions (in thousands):


	June 30, 2021
	Gross Amounts of Recognized Assets/ Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet
Description							Derivative Financial Instruments		Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	1,346	$	—	$	1,346	$	(1,346)	$	—	$	—
Derivative liabilities	(17,489)		—		(17,489)		1,346		—		(16,143)


	December 31, 2020
	Gross Amounts of Recognized Assets/ Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet
Description							Derivative Financial Instruments		Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	11,907	$	—	$	11,907	$	(2,207)	$	—	$	9,700
Derivative liabilities	(3,625)		—		(3,625)		2,207		—		(1,418)