Note 6 - Derivative Instruments and Hedging Activities |
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
6. Derivative Instruments and Hedging Activities:
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk.
Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. In May 2020, the Company entered into a pay-fixed, receive-variable interest rate swap with a Canadian chartered bank to limit the potential interest rate fluctuations incurred on its future cash flows related to variable interest payments on the Second Amended 2019 Credit Facility. The notional value of the interest rate swap was $70 million. During the third quarter of fiscal year 2022, the Company elected to discontinue its application of hedge accounting to its interest rate swaps prospectively. Until the interest rate swaps matured in June 2023, the derivatives continued to be carried at fair value in the accompanying Consolidated Balance Sheets with changes in their fair value from the date of discontinuance recognized in current period earnings in Interest expense, net in the Consolidated Statements of Operations and Comprehensive Income (Loss). Unrealized gains and losses in Accumulated other comprehensive income ("AOCI") as of the date of discontinuance were realized in net income over the remaining term of the underlying forecasted interest payments into interest expense over the original term of the hedged debt. Prior to the discontinuance, for the interest rate swap contracts, unrealized gains or losses on the effective portion of these contracts had been included in other comprehensive income (OCI) and reclassified to earnings when the hedged transaction settled. As of December 31, 2025, there are no interest swaps held by the Company.
The Company does not use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between and months, and the interest rate swap fully matured as of June 30, 2023.
The Company has designated its foreign exchange contracts as hedging instruments in cash flow hedges of forecast transactions. Where the critical terms of the hedging instrument and the entire hedged forecasted transaction are the same, in accordance with Topic 815, the Company concludes that changes in fair value and cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. The Company designated the foreign exchange hedge as a cash flow hedge of expected future payments at the inception of the contract. Accordingly, for the foreign exchange contracts, unrealized gains or losses on the effective portion of these contracts were included within other comprehensive income (loss) and reclassified to earnings when the hedged transaction is settled. Cash flows from hedging activities were classified under the same category as the cash flows from the hedged items in the Consolidated Statements of Cash Flows. The fair value of the contracts, as of December 31, 2025 and December 31, 2024, is recorded as derivative instrument assets or liabilities. Where hedged transactions are no longer probable to occur, the loss on the associated forward contract would be recognized in earnings.
As of December 31, 2025, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $27.2 million, of which $27.2 million met the requirements of ASC 815 and were designated as hedges.
As of December 31, 2024 the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $29.4 million, of which $29.4 million met the requirements of ASC 815 and were designated as hedges.
As of December 31, 2025, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:
Fair value of derivative instruments and effect of derivative instruments on financial performance
The effect of these derivative instruments on our Consolidated Financial Statements as of, and for the years ended December 31, 2025 and 2024, were as follows (amounts presented do not include any income tax effects).
Fair value of derivative instruments in the consolidated balance sheets (see “Note 5. Fair Value Measurement”)
Movement in AOCI balance for the year ended December 31, 2025 (Dollar amounts in thousands of U.S. dollars)
Movement in AOCI balance for the year ended December 31, 2024 (Dollar amounts in thousands of U.S. dollars)
Movement in AOCI balance for the year ended December 31, 2023 (Dollar amounts in thousands of U.S. dollars)
Effects of derivative instruments on income and other comprehensive income (OCI) (Dollar amounts in thousands of U.S. dollars)
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