v3.26.1
Derivative Instruments and Hedging Activities
 6 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities

11. Derivative Instruments and Hedging Activities

During the six months ended March 31, 2026, we did not purchase or hold any derivative instruments for trading or speculative purposes. See Note 4, Fair Value Measurements, for the classification and fair value of our derivative instruments.

Designated Cash Flow Hedges

Foreign Currency Forwards

We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. At March 31, 2026, we held forwards, which expire ratably through September 30, 2026, with a notional amount, based upon exchange rates at March 31, 2026, as follows (in thousands):

Notional Currency

 

Notional Amount

 

Mexican Peso

 

$

9,548

 

Canadian Dollar

 

 

4,469

 

Total

 

$

14,017

 

 

The changes in fair value related to these foreign currency forwards are recorded quarterly into AOCL. As the forwards are exercised, the realized gains or losses are recognized into cost of goods sold (“COGS”), based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended March 31, 2026 and 2025, we recognized a net loss of $0.2 million and a net gain of $0.3 million, respectively. For the six months ended March 31, 2026 and 2025, we recognized a net loss of $0.5 million and a net gain of $0.1 million, respectively. Based on March 31, 2026, valuations and exchange rates, we expect to reclassify a net gain of approximately $0.4 million out of AOCL and into COGS over the next 12 months.

Interest Rate Swap

In April 2023, we entered into a three-year interest rate swap agreement with an initial notional amount of $200 million (the “Interest Rate Swap”) to mitigate the exposure to higher interest rates in connection with our Term Loan B due in 2030. The Interest Rate Swap involves fixed monthly payments at the contract rate of 3.705%, and in return, we will receive a floating interest payment based on the 1-month Adjusted Term SOFR Rate. The Interest Rate Swap will mature in April 2026 and is designated as a cash flow hedge. Changes in the fair value of the Interest Rate Swap are recorded quarterly, net of income tax, and included in AOCL.

Each month, we recognize either income or expense, based on the position of the interest rates, into interest expense on our condensed consolidated statements of earnings related to the Interest Rate Swap. For the three months ended March 31, 2026 and 2025, we recognized expense of $0.1 million and income of $0.4 million, respectively. For the six months ended March 31, 2026 and 2025, we recognized income of $0.1 million and $0.9 million, respectively. At March 31, 2026, we expect to reclassify a net loss of approximately $0.1 million out of AOCL and into interest expense over the next 12 months.

Non-Designated Derivative Instruments

We also use foreign exchange forward contracts to mitigate our exposure to exchange rate fluctuations related to certain intercompany balances that are not considered permanently invested. At March 31, 2026, we held forward contracts, which mature at various dates during the first month of each of the next two fiscal quarters, with a notional amount, based upon exchange rates at March 31, 2026, as follows (in thousands):

Notional Currency

 

Notional Amount

 

British Pound

 

$

48,308

 

Euro

 

 

18,024

 

Canadian Dollar

 

 

11,643

 

Mexican Peso

 

 

1,715

 

Total

 

$

79,690

 

Changes in the fair value of the forward contracts, as well as realized gains or losses upon settlement, are recorded in selling, general and administrative expenses. For the three months ended March 31, 2026 and 2025, the effects of these foreign exchange contracts on our condensed consolidated financial statements were a net gain of $0.4 million and a loss of $0.7 million, respectively. For the six months ended March 31, 2026 and 2025, the effects of these foreign exchange contracts on our condensed consolidated financial statements were net gains of $0.1 million and $1.0 million, respectively.