Note 3 - Derivative Instruments and Hedging Activities |
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Jun. 30, 2025 | ||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
3. Derivative Instruments and Hedging Activities
The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which requires derivative instruments to be reported in the condensed consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk such as changes in commodity prices, foreign currencies, and interest rates. The Company does hold or issue derivative financial instruments for trading purposes.
The Company periodically utilizes commodity derivatives and foreign currency forward purchase and sales contracts in the normal course of business. Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded in the Company’s condensed consolidated statements of comprehensive income. The commodity and foreign currency forward contract gains and losses are not material to the Company’s condensed consolidated financial statements for the periods presented.
Additionally, the Company maintains interest rate swap agreements and owns stock warrants described in more detail below.
Interest Rate Swaps
In March 2020, the Company entered into interest rate swap agreements, which were still outstanding as of June 30, 2025. The Company formally documented all relationships between interest rate hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges and therefore, the effective portions of their gains or losses are reported as a component of accumulated other comprehensive income (loss) in the condensed consolidated balance sheets.
The amount of after-tax unrealized (losses) gains recognized in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2025 was $(3,090) and $(7,403), respectively and for the three and six months ended June 30, 2024 was $(1,730) and $252, respectively. The cash flows of the swaps are recognized as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in earnings.
Stock Warrants
During the fourth quarter of 2023, the Company entered into a $30,000 agreement with Wallbox N.V. (Wallbox) to purchase 5% of its Class A common stock (Wallbox Shares) and acquire stock warrants, the latter of which provide the rights to an incremental approximate 5% ownership in the Class A common stock outstanding of Wallbox upon exercise at a fixed price with anti-dilution protections for a period of time. During the third quarter of 2024 and the first and second quarters of 2025, the Company received additional warrants in connection with additional rounds of funding performed by Wallbox through the Company's anti-dilution protection rights. In accordance with GAAP, the Company is required to adjust the carrying value of these warrants to market value on a quarterly basis. Gains and losses attributable to the stock warrants are recognized in other expense, net in the condensed consolidated statements of comprehensive income.
The loss attributable to the stock warrants was $1,215 and $4,571 for the three and six months ended June 30, 2025, respectively, and $1,035 and $6,268 for the three and six months ended June 30, 2024, respectively.
Fair Value
The following table presents the fair value of all the Company’s interest rate swaps and stock warrants.
The fair values of the interest rate swaps and stock warrants are included in operating lease and other assets in the condensed consolidated balance sheet as of June 30, 2025, and December 31, 2024. Excluding the impact of credit risk, the fair value of the interest rate swaps as of June 30, 2025, and December 31, 2024, is an asset of $19,037 and $29,254, respectively, which represents the amount the Company would receive to exit all of the agreements on those dates.
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