Derivative Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Derivatives Designated as Hedging Instruments

The Company uses cross-currency swap contracts to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converts a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. At inception, the Company designates its cross-currency swaps as net investment hedges.

As of June 30, 2021, the Company had cross-currency swap agreements at notional amounts totaling $250.0 million, which declines to $25.0 million over various contract periods ending between April 15, 2022 and April 15, 2027. Under the terms of the agreements, the Company is to receive net interest payments at fixed rates ranging from approximately 0.8% to 2.9% of the notional amounts.

As of June 30, 2021 and December 31, 2020, the fair value carrying amount of the Company's derivatives designated as hedging instruments are recorded as follows (dollars in thousands):

		Asset / (Liability) Derivatives
Derivatives designated as hedging instruments	Balance Sheet Caption	June 30, 2021	December 31, 2020
Net Investment Hedges
Cross-currency swaps	Other long-term liabilities	(580)	(5,000)

The following table summarizes the income recognized in accumulated other comprehensive income (loss) ("AOCI") on derivative contracts designated as hedging instruments as of June 30, 2021 and December 31, 2020, and the amounts reclassified from AOCI into earnings for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

	Amount of Loss Recognized in AOCI on Derivatives (Effective Portion, net of tax)					Amount of Income (Loss) Reclassified from AOCI into Earnings
						Three months ended June 30,				Six months ended June 30,
	As of June 30, 2021		As of December 31, 2020		Location of Income (Loss) Reclassified from AOCI into Earnings (Effective Portion)	2021		2020		2021		2020
Net Investment Hedges
Cross-currency swaps	$	(250)	$	(3,580)	Other income (expense), net	$	—	$	—	$	—	$	—

Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred amounts from AOCI into earnings.

Derivatives Not Designated as Hedging Instruments

As of June 30, 2021, the Company was party to foreign currency exchange forward contracts to economically hedge changes in foreign currency rates with notional amounts of approximately $126.5 million. The Company uses foreign exchange contracts to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain of its receivables, payables and intercompany transactions denominated in foreign currencies. The foreign exchange contracts primarily mitigate currency exposures between the U.S. dollar and the Euro, Mexican peso and the Chinese yuan, and have various settlement dates through December 2021. These contracts are not designated as hedge instruments; therefore, gains and losses on these contracts are recognized each period directly into the consolidated statement of operations.

The following table summarizes the effects of derivatives not designated as hedging instruments on the Company's consolidated statement of operations (dollars in thousands):

		Amount of Income (Loss) Recognized in Earnings on Derivatives
		Three months ended June 30,				Six months ended June 30,
	Location of Income (Loss) Recognized in Earnings on Derivatives	2021		2020		2021		2020
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other income (expense), net	$	(1,160)	$	550	$	2,860	$	480

Fair Value of Derivatives

The fair value of the Company's derivatives are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of the Company's cross-currency swaps and foreign exchange contracts use observable inputs such as interest rate yield curves and forward currency exchange rates. Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are shown below (dollars in thousands):  

Description	Frequency	Asset / (Liability)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
Cross-currency swaps	Recurring	$	(580)	$	—	$	(580)	$	—
Foreign exchange contracts	Recurring	$	(670)	$	—	$	(670)	$	—
December 31, 2020
Cross-currency swaps	Recurring	$	(5,000)	$	—	$	(5,000)	$	—
Foreign exchange contracts	Recurring	$	140	$	—	$	140	$	—