Derivative Financial Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments | Note 6 — Derivative Financial Instruments The Company entered into treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 5.875% Senior Unsecured Notes. These hedges were designated as cash flow hedges, thus any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of our 5.875% Senior Unsecured Notes, we net settled these derivatives for $3.6 million in cash and the deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The remaining balance of deferred gains as of September 30, 2025 is approximately $3.4 million. The effect of the settled treasury locks reduces the effective interest rate of the senior notes by approximately 0.10%. The Company also had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes due in 2027. These hedges were designated as cash flow hedges as well and upon issuance of our 3.95% Senior Unsecured Notes in 2017, we net settled these derivatives and the deferred gains recorded in other comprehensive income are being released to interest expense over the life of the senior notes. The remaining balance of deferred gains as of September 30, 2025 is approximately $1.4 million. The effect of these settled treasury locks reduces the effective interest rate of the 3.95% Senior Unsecured Notes due in 2027 by approximately 0.25%. Cross Currency and Interest Rate Swap Agreements In November 2020, we entered into a cross currency and interest rate swap, which is designated as a cash flow hedge of a €270 million, 5-year amortizing, intercompany loan between one of our European subsidiaries and the U.S. parent company. Changes in the spot exchange rates are recorded to the general ledger and offset the fair value re-measurement of the hedged item. The net difference in the interest rates coupons is recorded as a credit to interest expense. The derivative swaps €270 million bearing interest at a fixed rate of 0.30% for $319.9 million at a fixed rate interest of 1.115%. The interest coupons settle semi-annually. The principal will amortize each year on November 15, as follows: for years 1 through 4, beginning November 15, 2021, €50 million versus $59.2 million, and a final settlement on November 15, 2025 of €70 million versus $82.9 million.
Foreign Currency Forward Exchange Contracts
A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British pound sterling. We have entered into contracts to exchange U.S. dollars for Euros and British pound sterling through March 2028. The aggregate notional amount of these contracts was $400.8 million and $386.4 million at September 30, 2025 and December 31, 2024, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges, losses of $5.6 million and gains of $34.3 million for the quarter and nine months ended September 30, 2025, respectively, and gains of $13.4 million and $4.3 million for the quarter and nine months ended September 30, 2024, respectively, were recorded in other comprehensive income. We recognized gains of $4.5 million and $6.3 million in gross margin during the quarter and nine months ended September 30, 2025, respectively, and losses of $0.2 million and $2.2 million in gross margin during the quarter and nine months ended September 30, 2024, respectively. In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the remeasurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarter and nine months ended September 30, 2025, we recognized net foreign exchange losses of $0.9 million and $1.2 million, respectively, in the Condensed Consolidated Statements of Operations. During the quarter and nine months ended September 30, 2024, we recognized net foreign exchange losses of $1.2 million and $3.2 million, respectively. The net foreign exchange impact recognized from these contracts offsets the translation exposure of these transactions. The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income (loss) for the quarters and nine months ended September 30, 2025 and September 30, 2024 was as follows:
Unrealized gains of $12.3 million recorded in accumulated other comprehensive loss, less taxes of $3.2 million, as of September 30, 2025, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.
Commodity Swap Agreements We use commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of September 30, 2025, we had commodity swap agreements with a notional value of $16.3 million. The swaps mature monthly through September 2027. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items.
The fair values of outstanding derivative financial instruments as of September 30, 2025 and December 31, 2024 were as follows:
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