DERIVATIVES

9 Months Ended

Sep. 30, 2023

DERIVATIVES

DERIVATIVES

NOTE 13 — 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 three and nine months ended September 30, 2023 and 2022.

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 September 30, 2023. The Company does not expect any counterparties to fail to meet their obligations.

Cash Flow Hedges

Certain foreign currency forward contracts are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $68,390 at September 30, 2023 and $66,296 at December 31, 2022.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at September 30, 2023 and December 31, 2022 and have a termination date of August 2025.

The Company has no commodity contracts outstanding at September 30, 2023. The Company had commodity contracts with a notional amount of 875,000 pounds at December 31, 2022, which were qualified and designated as cash flow hedges.

In March 2023, the Company entered into interest rate swap agreements, which were qualified and designated as cash flow hedges, with an aggregate notional amount of $150,000. The interest rate swaps will effectively convert the interest rate on $150,000 of the Term Loan discussed in Note 10 from a variable rate based on one-month SOFR to a fixed rate.

Net Investment Hedges

The Company has foreign currency forward contracts that qualify and are designated as net investment hedges. The dollar equivalent gross notional amount of these contracts was $87,748 at September 30, 2023 and $88,843 at December 31, 2022.

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 $403,802 and $380,443 at September 30, 2023 and December 31, 2022, respectively.

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

	September 30, 2023								December 31, 2022
	Other		Other						Other		Other
	Current		Current		Other		Other		Current		Current		Other		Other
Derivatives by hedge designation	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Designated as hedging instruments:
Foreign exchange contracts	$	2,079	$	786	$	—	$	—	$	1,467	$	738	$	—	$	—
Interest rate swap agreements		—		—		3,946		—		—		—		—		—
Forward starting swap agreements		—		—		24,877		—		—		—		19,291		—
Net investment contracts		291		—		—		—		—		2,229		—		—
Commodity contracts		—		—		—		—		181		33		—		—
Not designated as hedging instruments:
Foreign exchange contracts		1,157		2,162		—		—		2,348		790		—		—
Total derivatives	$	3,527	$	2,948	$	28,823	$	—	$	3,996	$	3,790	$	19,291	$	—

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

		Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives by hedge designation	Classification of gain (loss)	2023		2022		2023		2022
Not designated as hedges:
Foreign exchange contracts	Selling, general & administrative expenses	$	(6,705)	$	(3,374)	$	5,066	$	(2,836)

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

Total gain recognized in AOCI, net of tax	September 30, 2023		December 31, 2022
Foreign exchange contracts	$	715	$	627
Interest rate swap agreements		2,952		—
Forward starting swap agreements		17,150		13,191
Net investment contracts		10,295		9,440
Commodity contracts		—		91

The Company expects a gain of $715 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 September 30,				Nine Months Ended September 30,
	Gain (loss) recognized in the
Derivative type	Consolidated Statements of Income:	2023		2022		2023		2022
Foreign exchange contracts	Sales	$	1,757	$	229	$	4,847	$	590
	Cost of goods sold		159		573		187		1,202
Commodity contracts	Cost of goods sold		(3)		(319)		194		(40)