DERIVATIVE INSTRUMENTS |
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| DERIVATIVE INSTRUMENTS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS | 8. DERIVATIVE INSTRUMENTS Interest Rate Swaps We entered into interest rate swap agreements to hedge forecasted monthly interest rate payments on our floating rate debt. Under the terms of the interest rate swap agreements (“Swap Agreements”), we receive payments based on the 1-month SOFR (3.68% as of March 31, 2026). We had the following Swap Agreements as of March 31, 2026:
During the three months ended March 31, 2026, there were no Swap Agreements that expired. We designated the Swap Agreements as cash flow hedges. A portion of the amount included in accumulated other comprehensive (loss) income is reclassified into interest expense, net as a yield adjustment as interest is either paid or received on the hedged debt. The fair value of our Swap Agreements is based upon Level 2 inputs. We have considered our own credit risk and the credit risk of the counterparties when determining the fair value of our Swap Agreements. It is our policy to execute such instruments with creditworthy banks and not to enter into derivative financial instruments for speculative purposes. We believe our interest rate swap counterparty will be able to fulfill its obligations under our agreements, and we believe we will have debt outstanding through the expiration date of the swap agreements such that the occurrence of future cash flow hedges remains probable. The estimated fair value of our Swap Agreements in the condensed consolidated balance sheets was as follows:
A cumulative gain, net of tax, of $135 and $431 is recorded in accumulated other comprehensive (loss) income as of March 31, 2026 and December 31, 2025, respectively. The Company recognized a gain, net of tax, of $977 and a loss, net of tax, of $695 in other comprehensive loss for the three months ended March 31, 2026 and 2025, respectively. There was a gain, net of tax, of $411 and $577 reclassified from accumulated other comprehensive (loss) income into earnings for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, approximately $693 is expected to be reclassified from accumulated other comprehensive (loss) income into interest expense, net over the next 12 months. Foreign Currency Hedge We entered into forward contracts to hedge forecasted Mexican Peso (“MXN”) denominated costs associated with our Mexican subsidiary. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any changes in the fair value of designated cash flow hedges are recorded in other comprehensive loss and are reclassified from accumulated other comprehensive (loss) income into earnings in the period the hedged item impacts earnings. As of March 31, 2026, the Company had outstanding contracts with a total notional amount of $133,688 MXN and recognized a cumulative gain, net of tax, of $47 in accumulated other comprehensive (loss) income. The Company recognized a gain, net of tax, of $8 and a loss, net of tax, of $55 in other comprehensive loss for the three months ended March 31, 2026 and 2025, respectively. There was a gain, net of tax, of $86 and a loss, net of tax, of $314 reclassified from accumulated other comprehensive (loss) income into earnings for the three months ended March 31, 2026 and 2025. As of March 31, 2026, approximately $47 is expected to be reclassified from accumulated other comprehensive (loss) income into earnings over the next 12 months. |
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