Derivative Instruments and Hedging Activity |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2026 | |||
| Derivative Instruments and Hedging Activity [Abstract] | |||
| Derivative Instruments and Hedging Activity |
The Company may use forward exchange contracts and foreign currency denominated debt to manage its exposure to foreign exchange risk in order to reduce
the effect of fluctuating foreign currencies on short-term foreign currency denominated intercompany transactions, non-functional currency raw material purchases, non-functional currency sales, and other known foreign currency exposures. These
forward exchange contracts generally have maturities of less than 18 months. The Company’s primary hedging activities and their accounting
treatment are summarized below.
Forward exchange contracts – Certain forward exchange
contracts have been designated as cash flow hedges. The Company had $57.5 million and $49.9 million of forward exchange contracts designated as cash flow hedges outstanding as of March 31, 2026 and December 31, 2025, respectively, which are recorded in Other Accrued Expenses on the Company’s Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025, respectively. For the three months ended March 31, 2026 and 2025, the amounts reclassified into net earnings in the
Company’s Consolidated Statements of Earnings that offset the underlying transactions’ impact on earnings in the same period were not
material. In addition, the Company utilizes forward exchange contracts that are not designated as cash flow hedges. The results of these transactions were not material to the financial statements.
Net investment hedges – The
Company has designated certain foreign currency denominated long-term borrowings as partial hedges of the Company’s foreign currency net asset positions. As of March 31, 2026 and December 31, 2025, the total value of the Company’s net investment
hedges, which included Euro denominated long-term debt, was $304.4 million and $309.5 million, respectively. Changes in the fair value of this debt attributable to changes in the spot foreign exchange rate are recorded in foreign currency translation in Accumulated Other Comprehensive Loss (OCL). For the three months ended March 31, 2026 and 2025, the impact of foreign exchange rates on these debt instruments
decreased debt by $5.1 million and increased debt by $12.8 million, respectively, which has been recorded as foreign currency translation in OCL.
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