Note 13 – Financial Instruments

The Company’s financial instruments include cash equivalents, accounts receivable, other receivables, accounts payable, accrued liabilities, long-term debt, interest rate swaps and foreign currency hedges. For cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities, the Company believes that the carrying values of its financial instruments approximate the fair values because of their short-term nature. For borrowings under the Credit Agreement in long-term debt, the Company believes that the fair value approximates the carrying value because the interest rates are variable. The Company uses derivative instruments to manage the variability of foreign currency obligations and interest rates. The Company does not enter into derivatives for speculative purposes.

Forward Currency Exchange Contracts

The Company utilizes forward currency exchange contracts to manage its foreign currency exposure. The Company enters into forward currency exchange contracts for its operations in Mexico, Europe and Asia. These instruments are designated as cash flow hedges and the changes in fair value of the derivatives are recorded in accumulated other comprehensive loss on the consolidated balance sheets until earnings are affected by the variability of the cash flows. The fair value estimates for the Company’s forward currency exchange contracts are based on Level 2 inputs of the fair value hierarchy, which includes obtaining directly or indirectly observable values from third parties active in the relevant markets. Inputs in the fair value of the foreign currency forward contracts include prevailing forward and spot prices for currencies.

During the three and six months ended June 30, 2026, the Company recorded unrealized losses of $0.9 million ($0.6 million net of tax) and $1.7 million ($1.3 million net of tax), respectively, on its forward currency exchange contracts in other comprehensive income and transferred unrealized gains of $1.3 million and $2.6 million, respectively, to cost of sales.

During the three and six months ended June 30, 2025, the Company recorded unrealized gains of $4.6 million ($3.4 million net of tax) and $7.0 million ($5.3 million net of tax), respectively, on its forward currency exchange contracts in other comprehensive income and transferred unrealized losses of $0.3 million and $1.2 million, respectively, to cost of sales.

At times, the Company enters into forward currency exchange contracts that have not been designated as accounting hedges and, therefore, changes in fair value are recorded in other expense, net in the consolidated statements of income.

Interest Rate Swap Agreement

The Company entered into an interest rate swap agreement on August 1, 2025 to hedge a portion of its interest rate exposure on outstanding borrowings under the Credit Agreement. The Company’s previous interest rate swap agreement was terminated effective August 1, 2025. Under the interest rate swap agreement, the Company receives variable rate interest payments based on the one-month

Term SOFR rate and pays fixed rate interest payments based on a 3.965% fixed interest rate. The effect of the swap is to convert a portion of the floating rate interest expense to fixed interest rate expense. Based on the terms of the interest rate swap agreement and the underlying borrowings outstanding under the Credit Agreement, the interest rate swap agreement was determined to be highly effective, and thus qualifies and has been designated as a cash flow hedge. As such, changes in the fair value of the interest rate swap agreement are recorded in accumulated other comprehensive loss on the consolidated balance sheets until earnings are affected by the variability of cash flows. The fair value estimates for the Company’s interest rate swap agreement were based on Level 2 inputs of the fair value hierarchy, as the Company obtains the valuation from a third party active in relevant markets. The valuation of the interest rate swap agreement is primarily measured through various pricing models and discounted cash flow analysis that incorporate observable market parameters, such as interest rate yield curves and volatility.

As of June 30, 2026, the notional amount of the interest rate swap agreement was $146.3 million.

During the three and six months ended June 30, 2026, the Company recorded unrealized gains of $1.2 million ($0.9 million net of tax) and $2.3 million ($1.8 million net of tax), respectively, on the interest rate swap agreement in other comprehensive income (loss).

During the three and six months ended June 30, 2025, the Company recorded unrealized losses of $0.8 million ($0.5 million net of tax) and $2.1 million ($1.6 million net of tax), respectively, on the Company's previous interest rate swap agreement in other comprehensive income (loss).