v3.26.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Derivative instruments are accounted for at fair value. The accounting for changes in the fair value of a derivative depends on the intended use, designation and type of the derivative instrument. The Company does not designate any of its derivatives as hedges and, as such, records all changes in fair values as a component of earnings. Cash flow activity associated with the Company's derivative financial instruments is recorded in Cash flows from operating activities on the Consolidated Statement of Cash Flows.
Using derivative instruments means assuming counterparty credit risk. Counterparty credit risk relates to the loss the Company could incur if a counterparty were to default on a derivative contract. The Company primarily deals with investment grade counterparties and monitors its overall credit risk and exposure to individual counterparties. The Company does not anticipate non-performance by any counterparties. The amount of counterparty credit exposure is the unrealized gains, if any, on such derivative contracts. The Company does not require, nor does it post collateral, or security, on such contracts.
The Company is exposed to certain risks relating to its ongoing business operations. As a result, the Company enters into derivative transactions to manage these exposures. The primary risks managed through the use of derivative instruments are fluctuations in interest rates, foreign currency exchange rates and commodity prices. Fluctuations in these rates and prices can affect the Company’s operating results and financial condition. The Company manages the exposure to these market risks through operating and financing activities and through the use of derivative financial instruments. The Company does not enter derivative financial instruments for trading or speculative purposes.
Interest Rate Risk.
Borrowings outstanding under the Term Loan totaled $1,300.0 million at March 31, 2026. Borrowings under the Term Loan bear interest, at the option of Alliance Laundry, at a rate equal to an applicable margin plus (a) the adjusted base rate or (b) the term SOFR (both rates as defined in the Credit Agreement). The applicable margins for the Term Loan are currently 1.25% with respect to adjusted base rate loans and 2.25% with respect to term SOFR loans. An assumed 10% increase/decrease in the SOFR interest rate in effect at March 31, 2026 would increase/decrease annual interest expense $2.0 million on the non-hedged portion of the borrowing.
Effective September 3, 2024, the Company entered into a $600.0 million interest rate swap agreement to hedge a portion of our interest rate risk related to our long-term borrowings. Under this swap, which matures on September 1, 2027, the Company pays a fixed rate of 3.61% and receives or pays monthly interest payments based upon a comparison to the one-month SOFR rate.
Effective April 1, 2025, the Company entered into a $150.0 million interest rate swap agreement to hedge a portion of our interest rate risk related to our long-term borrowings. Under the swap, which matures on April 3, 2028, the Company pays a fixed rate of 3.36% and receives or pays monthly interest payments based upon a comparison to the one-month SOFR rate.
Interest rate caps are in place as part of the Asset Backed Facilities to limit the Company’s exposure to interest rate increases which may adversely affect the overall performance of the Company’s equipment financing activities. The interest rate cap strike rates are 5.19%, 5.00% and 7.00%.
Foreign Currency Risk.
The Company has manufacturing, sales, and distribution facilities in the Czech Republic, China and Thailand. The Company also has various sales and distribution facilities in Brazil, France, Spain, Italy, Germany and the United Arab Emirates. The Company also makes investments and enters into transactions denominated in foreign currencies. The vast majority of the Company’s international sales from its domestic operations are denominated in U.S. dollars. However, the Company is exposed to transactional and translational foreign exchange risk related to its foreign operations.
Regarding transactional foreign exchange risk, the Company from time to time enters into certain forward exchange contracts to reduce the variability of the earnings and cash flow impacts of foreign denominated receivables and payables. The Company does not designate these contracts as hedge transactions. Accordingly, the mark-to-market impact of these contracts is recorded each period to current earnings. At March 31, 2026, the Company had no outstanding foreign currency contracts.
The Company’s primary translation exchange risk exposures at March 31, 2026 were the euro, Czech koruna, and Thai baht. Amounts invested in non-U.S. based subsidiaries are translated into US dollars at the exchange rate in effect at period end. The resulting translation adjustments are recorded in accumulated other comprehensive income/(loss) as foreign currency translation adjustments.
Commodity Risk
The Company is subject to the effects of changing raw material and component costs caused by movements in underlying commodity prices. The Company purchases raw materials and components containing various commodities including nickel, zinc, aluminum, and copper. The Company generally buys these raw materials and components based upon market prices that are established with the vendor as part of the procurement process.
From time to time, the Company enters into contracts with its vendors to lock in commodity prices for various periods to limit its near-term exposure to fluctuations in raw material and component prices. In addition, the Company enters into commodity forward contracts, for commodities such as nickel, copper and aluminum, to reduce the variability on its earnings and cash flows of purchasing raw materials containing such commodities. The Company does not designate these contracts as hedge transactions. Accordingly, the mark-to-market impacts of these contracts are recorded each period to current earnings. At March 31, 2026, the Company was managing $2.9 million notional value of nickel forward contracts.
The Company presents its derivatives at gross fair values in the Condensed Consolidated Balance Sheets and does not maintain derivative contracts which would require financial instrument or collateral balances. The following tables summarize the fair value of the Company’s outstanding derivative contracts included within the Condensed Consolidated Balance Sheets.
March 31, 2026
Fair Value (Level 2)
(in thousands)Notional AmountAssetsLiabilitiesLocation on
Balance Sheet		Term
Undesignated derivatives:
Interest rate swap$750,000 $994 $— Prepaid expenses and other current assets and Other assetsVarious through 4/3/2028
Commodity hedges2,943 331 — Prepaid expenses and other current assetsVarious through 1/5/27
Interest rate cap52,447 63 — Other long-term assetsVarious through 9/15/31
Total undesignated derivatives$1,388 $— 
December 31, 2025
Fair Value (Level 2)
(in thousands)Notional AmountAssetsLiabilitiesLocation on
Balance Sheet		Term
Undesignated derivatives:
Interest rate swap$750,000 $— $3,341 Other current liabilities and long-term liabilitiesVarious through 4/3/2028
Commodity hedges3,177 281 14 Prepaid expenses and other current assets and Other current liabilitiesVarious through 12/31/25
Interest rate cap55,091 38 — Other long-term assetsVarious through 9/15/31
Total undesignated derivatives$319 $3,355 
The following table presents the combined cash and non-cash effects of derivative instruments on the Company’s Condensed Consolidated Statements of Comprehensive Income.
Gain/(Loss) Recognized on Undesignated Derivatives
(in thousands)Location in Statement ofThree Months Ended March 31,
Undesignated DerivativesComprehensive Income20262025
Interest rate swapInterest expense, net$4,503 $(4,703)
Foreign currency hedgesCost of sales306 (62)
Commodity hedgesCost of sales61 (27)
Interest rate capInterest expense, net25 (80)
$4,895 $(4,872)