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HEDGING INSTRUMENTS
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
HEDGING INSTRUMENTS HEDGING INSTRUMENTS
 
Disclosure within this note is presented to provide transparency about how and why we use derivative and non-derivative instruments (collectively “hedging instruments”), how the hedging instruments and related hedged items are accounted for, and how the hedging instruments and related hedged items affect our financial position, results of operations, and cash flows.

We recognize all hedging instrument assets and liabilities on the balance sheet at fair value at the balance sheet date. Hedging instruments that do not qualify for hedge accounting treatment are recorded at fair value through earnings. To qualify for hedge accounting treatment, hedging instruments must be highly effective in offsetting changes to expected future cash flows or fair value on hedged transactions. If the hedging instrument qualifies for hedge accounting, changes in the fair value of the hedging instrument from the effective portion of the hedge are deferred in AOCI, net of tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. We immediately record in earnings the extent
to which a hedging instrument is not effective in achieving offsetting changes in fair value. We de-designate hedging instruments from hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated hedging instruments, the gain or loss from the time of de-designation through maturity of the instrument is recognized in earnings. Any gain or loss in AOCI at the time of de-designation is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Refer to “Note 14. Accumulated Other Comprehensive Income” for further information regarding the effect of hedging instruments on the unaudited condensed consolidated statements of income for the three months ended March 31, 2026 and 2025.

We enter into master netting arrangements with the counterparties to our derivative transactions which permit certain outstanding receivables and payables to be offset in the event of default. Our derivative contracts do not require either party to post cash collateral. We elect to present our derivative assets and liabilities in the accompanying unaudited condensed consolidated balance sheets on a gross basis. All cash flows related to our foreign currency exchange contracts are classified as operating cash flows, which is consistent with the cash flow treatment of the underlying items being hedged. 

Our subsidiaries enter into foreign currency exchange contracts to reduce the exchange risk associated with their forecasted intercompany inventory purchases and sales for the next year. We may also enter into other foreign currency exchange contracts, cross currency swaps, or foreign-denominated debt issuances to reduce the impact of foreign currency fluctuations associated with specific balance sheet exposures, including net investments in certain foreign subsidiaries.

The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions, including transactions denominated in euro, British pound, Japanese yen, Canadian dollar, and Australian dollar. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our corporate policy prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with large, well-capitalized multinational financial institutions and we do not hold or engage in transactions involving derivative instruments for purposes other than risk management. Our accounting policies for these contracts are based on our designation of such instruments as hedging transactions.

Cash Flow Hedges 

We have designated our foreign currency exchange contracts and our interest rate swaps as cash flow hedges because these derivative instruments reduce our exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange and to interest rates on variable interest obligations of our Term Loan. Unless noted otherwise, we have also designated our derivative instruments as qualifying for hedge accounting treatment.

We did not de-designate any instruments from hedge accounting treatment during the three months ended March 31, 2026, or 2025. Gains and losses related to hedge ineffectiveness recognized in earnings during the three months ended March 31, 2026 and 2025, were not material. As of March 31, 2026, the estimated amount of gains, net of tax, from our foreign exchange contracts which are expected to be reclassified out of AOCI and into earnings within the next twelve months is $1.3 million if exchange rates do not fluctuate from the levels as of March 31, 2026. As of March 31, 2026, the estimated amount of gains, net of tax, from our interest rate swap contract which are expected to be reclassified out of AOCI and into earnings within the next twelve months is $0.7 million if interest rates do not fluctuate from the levels as of March 31, 2026.

Interest Rate Swaps: We have entered into an interest rate swap contract to reduce the effect of variable interest obligations of our Term Loan. Beginning in November 2025 through November 2028, the variable interest rate associated with $250.0 million of borrowings outstanding under our Credit Facility became effectively fixed at 3.4% plus the applicable credit spread. Our previous interest rate swap contract, from March 2023 through October 2025, on the variable interest rate associated with the $250.0 million of borrowings under our Credit Facility, was effectively fixed at 3.9% plus the applicable credit spread.

Foreign Currency Exchange Contracts: We target to hedge approximately 75% to 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British pound, Japanese yen, Canadian dollar, and Australian dollar. We have additional unhedged foreign currency exposures related to intercompany foreign transactions and emerging markets where it is not practical to hedge. We primarily utilize foreign currency exchange contracts with durations of less than 24 months. Quarterly, we enter into contracts to hedge incremental portions of anticipated foreign currency transactions for the current and following year. As a result, our risk with respect to foreign currency exchange rate fluctuations and the notional value of foreign currency exchange contracts may vary throughout the year. The U.S. dollar is the currency purchased or sold in all of our foreign currency exchange contracts. The notional amount of foreign currency exchange contracts to hedge forecasted intercompany inventory purchases and sales totaled $384.6 million and $397.6 million as of March 31, 2026, and December 31, 2025, respectively.
The following table presents the effects of cash flow hedge accounting on our unaudited condensed consolidated statements of income and comprehensive income, and provides information regarding the location and amounts of pretax gains or losses of derivatives:
(in thousands)Financial statement line items in which effects of cash flow hedges are recordedThree Months Ended
March 31,
20262025
Foreign currency exchange contractsCost of revenue$418,081 $375,048 
Gain (loss) reclassified from accumulated other comprehensive income into net income$150 $3,745 
Interest rate swap contractInterest expense$(7,741)$(7,666)
Gain (loss) reclassified from accumulated other comprehensive income into net income$205 $324 

Net Investment Hedges, Euro-Denominated Notes

In June 2015, we issued and sold through a private placement an aggregate principal amount of €88.9 million in euro-denominated 1.785% Series C Senior Notes that were due June 18, 2025. We designated these euro-denominated notes as a hedge of our euro net investment in certain foreign subsidiaries to reduce the volatility caused by changes in foreign currency exchange rates in the euro relative to the U.S. dollar. As a result of this designation, gains and losses from the change in the translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than earnings. We recorded a loss of $3.0 million, net of tax, within AOCI as a result of net investment hedge activity for the three months ended March 31, 2025. At the maturity of the 1.785% Series C Senior Notes in June 2025, we paid the notional amount of €88.9 million, equivalent to $103.4 million at the date of payment. Refer to “Note 13. Debt” to the consolidated financial statements included in our 2025 Annual Report for further information regarding these euro-denominated notes.

Net Investment Hedges, Cross Currency Swaps

We have entered into cross currency swap contracts as a hedge of our net investment in certain foreign subsidiaries to reduce the volatility caused by changes in foreign currency exchange rates relative to the U.S. dollar. The cross currency swaps outstanding as of March 31, 2026, have maturity dates beginning on March 31, 2028, through September 11, 2032.

The following table presents the outstanding cross currency swaps notional amounts that will be delivered to and received from the counterparties at maturity:
(in thousands)
Maturity DateNotional Amount to be Delivered at MaturityNotional Amount to be Received at Maturity
3/31/2028€35,000 $37,755 
6/30/2028€90,000 $98,217 
6/29/2029€20,000 $21,268 
7/17/2028€76,000 $88,113 
7/31/2028€39,000 $45,735 
9/11/2032¥3,683,750 $25,000 
The changes in fair value of the cross currency swap contracts are recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated or all or a portion of the hedge no longer qualifies for hedge accounting treatment. We recorded a gain of $4.6 million and a loss of $3.6 million, net of tax, within AOCI as a result of these net investment hedges, during the three months ended March 31, 2026, and 2025, respectively. We receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swaps. This interest rate component is excluded from the assessment of hedge effectiveness and is recognized as a reduction to interest expense over the life of the hedge instrument. We recognized approximately $1.0 million related to the excluded component as a reduction of interest expense for the three months ended March 31, 2026, and $0.4 million for the three months ended March 31, 2025.

Fair Values of Hedging Instruments Designated as Hedges in Consolidated Balance Sheets

The fair values of hedging instruments and their respective classification on our unaudited condensed consolidated balance sheets and amounts subject to offset under master netting arrangements consisted of the following:
(in thousands) Hedging Assets
 March 31, 2026December 31, 2025
Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  
Foreign currency exchange contractsOther current assets$5,416 $2,793 
Interest rate swap contractOther current assets1,301 — 
Foreign currency exchange contractsOther long-term assets2,068 — 
Cross currency swapsOther long-term assets4,250 1,700 
Total derivative instruments presented as hedging instruments on the balance sheet13,035 4,493 
Gross amounts subject to master netting arrangements not offset on the balance sheet(3,186)(1,941)
Net amount $9,849 $2,552 




(in thousands) Hedging Liabilities
 March 31, 2026December 31, 2025
Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  
Foreign currency exchange contracts Accrued liabilities$3,873 $6,661 
Cross currency swapsOther long-term liabilities9,796 13,270 
Interest rate swap contractOther long-term liabilities— 446 
Total derivative instruments presented as hedging instruments on the balance sheet13,669 20,377 
Gross amounts subject to master netting arrangements not offset on the balance sheet(3,186)(1,941)
Net amount $10,483 $18,436