Derivatives and Hedging |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivatives and Hedging | Derivatives and Hedging We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances on our foreign subsidiaries’ balance sheets, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. We strive to control our exposure to these risks through our normal operating activities and, where appropriate, through derivative instruments. We periodically enter into contracts to hedge forecasted transactions that are denominated in foreign currencies. As part of our regular practice, we entered into a forward contract to hedge a 95.0 million Euro exposure on an intercompany note agreement related to proceeds from the sale of our former GGB business, allocated to foreign subsidiaries. As a result of this note, due to the changes in the foreign exchange rate, we recorded a loss of $0.4 million in the first quarter of 2025. This intercompany note and the corresponding foreign exchange contracts were both settled in March 2025. In February 2026, we executed a new intercompany note agreement. Beginning that month, we entered into forward contracts of 19.0 million Euro and $23.4 million to hedge exposures related to the note. The foreign exchange contracts were recorded at their fair market value as of June 30, 2026, with changes in market value recorded in income. The earnings impact of any foreign exchange contract that is specifically related to the purchase of inventory is recorded in cost of sales and the changes in market value of all other contracts are recorded in selling, general and administrative expense in the Consolidated Statements of Operations with the exception of our monthly forward contracts to hedge our Euro exposure which are recorded in other expense. The balances of foreign exchange derivative assets are recorded in other current assets and the balances of foreign exchange derivative liabilities are recorded in accrued expenses in the Consolidated Balance Sheets. In May 2019, we entered into cross currency swap agreements (the "Swap Agreements") with a notional amount of $100.0 million to manage an increased portion of our foreign currency risk by effectively converting a portion of the interest payments related to our then outstanding fixed-rate USD-denominated Senior Notes due 2026, including the semi-annual interest payments thereunder, to interest payments on the fixed-rate Euro-denominated debt of 89.6 million Euro with a weighted average interest rate of 3.5%, with interest payment dates of April 15 and October 15 of each year. In June 2026, we elected to terminate and settle the Swap agreements prior to their contractual maturity date of October 15, 2026. Upon settlement, we paid the counterparty approximately $1.8 million, representing the fair value of the Swap agreements at the settlement date, and the Swap agreements were extinguished. Amounts previously recorded in accumulated other comprehensive income as part of the net investment hedge will remain in equity until the related foreign operations are substantially liquidated or otherwise disposed of, consistent with the accounting treatment for net investment hedges. Following the settlement, we no longer have any outstanding obligations or rights under the Swap agreements. The cash payment associated with the June 2026 settlement of the Swap agreements of $1.8 million is included in investing activities in the Consolidated Statements of Cash Flows. During the term of the Swap agreements, we received semi-annual payments from the counterparties due to the difference between the interest rate on a notional amount the Senior Notes due 2026 and the interest rate on the Euro debt underlying the Swap agreements. There was no principal exchange at the inception of the arrangement. We designated the Swap agreements as qualifying hedging instruments and accounted for them as a net investment hedge. The gains and losses resulting from fair value adjustment to the Swap agreements, excluding interest accruals related to the above receipts, have been recorded in accumulated other comprehensive income within our cumulative foreign currency translation adjustment, as the Swap agreements are effective in hedging the designated risk. Interest-related cash flows related to the Swap agreements are included in operating activities in the Consolidated Statements of Cash Flows.
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