DERIVATIVES

3 Months Ended

Mar. 31, 2024

DERIVATIVES

DERIVATIVES

NOTE 12 — 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 months ended March 31, 2024 and 2023.

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 March 31, 2024. 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 $98,808 at March 31, 2024 and $84,148 at December 31, 2023.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. In the first quarter 2024, the Company entered into short-term contracts with the dollar equivalent gross notional amount of $100,000 at March 31, 2024 and have a termination date of June 2024. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at March 31, 2024 and December 31, 2023 and have a termination date of August 2025.

The Company has commodity contracts that are qualified and designated as cash flow hedges. The Notional amount of these contracts were 150,000 pounds and 200,000 pounds at March 31, 2024 and December 31, 2023, respectively.

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 $117,578 at March 31, 2024 and $119,607 at December 31, 2023.

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 $416,200 and $492,600 at March 31, 2024 and December 31, 2023, respectively.

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

	March 31, 2024								December 31, 2023
	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	$	2,391	$	238	$	—	$	—	$	1,548	$	687	$	—	$	—
Interest rate swap agreements		—		—		2,649		—		—		—		1,460		—
Forward starting swap agreements		—		—		23,005		40		—		—		20,377		—
Net investment contracts		1,261		—		—		—		—		3,351		—		—
Commodity contracts		52		—		—		—		45		—		—		—
Not designated as hedging instruments:
Foreign exchange contracts		1,617		998		—		—		4,063		623		—		—
Total derivatives	$	5,321	$	1,236	$	25,654	$	40	$	5,656	$	4,661	$	21,837	$	—

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

		Three Months Ended March 31,
Derivatives by hedge designation	Classification of (loss) gain	2024		2023
Not designated as hedges:
Foreign exchange contracts	Selling, general & administrative expenses	$	(1,615)	$	6,690

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	March 31, 2024		December 31, 2023
Foreign exchange contracts	$	1,628	$	721
Interest rate swap agreements		2,198		1,085
Forward starting swap agreements		16,386		14,696
Net investment contracts		9,089		7,136
Commodity contracts		39		34

The Company expects a gain of $1,667 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 March 31,
	Gain recognized in the
Derivative type	Consolidated Statements of Income:	2024		2023
Foreign exchange contracts	Sales	$	839	$	1,206
	Cost of goods sold		232		3
Commodity contracts	Cost of goods sold		2		179