Unrecognized tax benefits

[Table of Contents](#i90c0b6fc77a94e699123e3f505f83787_7)13. Derivative Instruments (continued)Six Months Ended June 30 (dollars in millions): 

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| Derivatives in ASC 815 cash flow hedging relationships |  | Amount of gain (loss) recognized in othercomprehensiveloss on derivatives |  | Location of gain (loss)reclassified fromaccumulated othercomprehensive lossinto earnings |  | Amount of gain (loss)reclassified fromaccumulated othercomprehensiveloss into earnings |
|  |  | 2022 |  | 2021 |  |  |  | 2022 |  | 2021 |
| Foreign currency contracts |  | $ | 2.8  |  |  | $ | (2.5) |  |  | Cost of products sold |  | $ | 0.8  |  |  | $ | (1.1) |  |
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Balance Sheet HedgesForeign Exchange ContractsThe Company periodically enters into foreign exchange contracts to mitigate the foreign currency volatility relative to certain intercompany loans. These foreign exchange contracts did not qualify for hedge accounting in accordance with ASC 815 and as such were marked to market through earnings. The fair value of the foreign exchange contracts was a liability of $0.2 million as of June 30, 2022. The fair value of the foreign exchange contracts was a liability of $0.8 million as of December 31, 2021 and recorded in Accrued liabilities within the consolidated balance sheet. The following table summarizes the contractual amounts of the Company's foreign exchange contracts that are designated as balance sheet hedges:

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| (dollars in millions) | June 30, 2022 |  | December 31, 2021 |
|  | Buy |  | Sell |  | Buy |  | Sell |
| Canadian dollar | $ | —  |  |  | $ | 113.9  |  |  | $ | —  |  |  | $ | 125.6  |  |

The amounts recognized within the consolidated statements of earnings related to the Company's foreign exchange contracts are set forth below.Three Months Ended June 30 (dollars in millions):

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| Derivatives not designated as hedging instruments: | Location of loss within the consolidated statements of earnings |  | 2022 |  | 2021 |
| Foreign exchange contracts | Other (income) expense - net |  | $ | (0.2) |  |  | $ | —  |  |

Six Months Ended June 30 (dollars in millions):

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| Derivatives not designated as hedging instruments: | Location of loss within the consolidated statements of earnings |  | 2022 |  | 2021 |
| Foreign exchange contracts | Other expense (income) - net |  | $ | 1.1  |  |  | $ | —  |  |

14. Income TaxesThe Company’s effective income tax rate for the three and six months ended June 30, 2022 was 23.7 percent and 23.6 percent, respectively. The Company estimates that its annual effective income tax rate for the full year 2022 will be between approximately 23.5 and 24.0 percent. The effective income tax rate for the three and six months ended June 30, 2021 was 21.9 percent and 22.2 percent, respectively. The change in the effective income tax rate for the six months ended June 30, 2022 compared to the effective income tax rate for the six months ended June 30, 2021 was primarily due to a change in geographical earnings mix. As of June 30, 2022, the Company had $14.3 million of unrecognized tax benefits of which $0.5 million would affect its effective income tax rate if recognized. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company’s U.S. federal income tax returns for 2017-2022 are subject to audit. The Company is subject to state and local income tax audits for tax years 2008-2022. The Company is subject to non-U.S. income tax examinations for years 2015-2022.17
