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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT | 3 Months Ended
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Mar. 31, 2025
Financial Instruments and Risk Management [Abstract] |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Our financial assets are comprised primarily of cash and cash equivalents, A/R, and derivatives used for hedging purposes. Our financial liabilities are comprised primarily of accounts payable, certain accrued and other liabilities, the Term Loans, borrowings under the Revolver, lease obligations, and derivatives used for hedging purposes. Currency risk: The majority of our currency risk is driven by operational costs, including income tax expense, incurred in local currencies by our subsidiaries. We cannot predict changes in currency exchange rates, the impact of exchange rate changes on our operating results, nor the degree to which we will be able to manage the impact of currency exchange rate changes. Such changes could have a material effect on our business, financial performance and financial condition. We enter into foreign currency forward contracts and foreign currency swaps to hedge our foreign currency risk related to anticipated future cash flows, monetary assets and monetary liabilities denominated in foreign currencies. Equity price risk: We are party to the TRS Agreement with a third-party bank to manage our cash flow requirements and exposure to fluctuations in the price of our Common Shares in connection with the settlement of certain outstanding equity awards under our SBC plans. The TRS Agreement provides for automatic annual one-year extensions (subject to specified conditions), and may be terminated (in whole or in part) by either party at any time. In Q1 2024, we terminated a portion of the TRS Agreement by reducing the notional quantity by 1.25 million Common Shares and received $32.3 from the counterparty in connection therewith (recorded in cash provided by financing activities in our consolidated statement of cash flows). Subsequently, our TRS Agreement covers a notional quantity of 1.25 million Common Shares (Current Notional Quantity). The value of the TRS Agreement is determined by comparing the market price of our Common Shares to the fixed price paid by the counterparty for such shares (Strike Price). Prior to March 14, 2025, our TRS Agreement had a Strike Price of $12.73 per share. On March 14, 2025, we re-struck our TRS Agreement with a Strike Price of $91.58 per share (Current Strike Price), which was the closing price of the Common Shares on March 14, 2025, and received $98.6 from the counterparty in connection therewith (recorded in cash provided by financing activities in our consolidated statement of cash flows). The counterparty under the TRS Agreement is obligated to make a payment to us upon its termination (in whole or in part) or expiration (Settlement) based on the increase (if any) in the value of the TRS Agreement over its term, in exchange for periodic payments made by us based on SOFR plus a specified margin applied to the Equity Notional Amount (as defined in the TRS Agreement, Current Strike Price multiplied by the Current Notional Quantity). Similarly, if the value of the TRS Agreement decreases over its term, we are obligated to pay the counterparty the amount of such decrease upon Settlement. We do not designate our TRS Agreement as an accounting hedge. Interest rate risk: Borrowings under the Credit Facility expose us to interest rate risk due to the potential variability of market interest rates (see note 8). In order to partially hedge against our exposure to interest rate variability on our Term Loans, we are party to various agreements with third-party banks to swap the variable interest rate with a fixed rate of interest for a portion of the borrowings thereunder. At March 31, 2025, associated with the Term A Loan, we had: (i) interest rate swaps with $130.0 notional amount expiring in December 2025; (ii) interest rate swaps with $80.0 notional amount (entered in March 2025) commencing in December 2025 and expiring in June 2027, and (iii) interest rate swaps with $40.0 notional amount (entered in March 2025) commencing June 2027 and expiring in June 2029. At March 31, 2025, associated with the Term B Loan, we had: (i) interest rate swaps with $200.0 notional amount expiring in December 2025; (ii) interest rate swaps with $40.0 notional amount (entered in March 2025) commencing in March 2025 and expiring in June 2027; (iii) interest rate swaps with $50.0 notional amount (entered in March 2025) commencing in December 2025 and expiring in June 2027; and (iv) interest rate swaps with $150.0 notional amount (entered in March 2025) commencing in June 2027 and expiring in June 2029. At March 31, 2025, the interest rate risk related to $516.8 of borrowings under the Credit Facility was unhedged, consisting of unhedged amounts outstanding under the Term Loans ($110.6 under the Term A Loan and $256.2 under the Term B Loan) and $150.0 outstanding under the Revolver. See note 8. Interest rate swaps are designated as cash flow hedges when the hedge relationship is effective and meets the hedge accounting criteria. Credit risk: Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss to us. We believe our credit risk of counterparty non-performance continues to be relatively low. We are in regular contact with our customers, suppliers and logistics providers to assess counterparty credit-related non-performance in 2024 or Q1 2025. If a key supplier (or any company within such supplier's supply chain) or customer fails to comply with their contractual obligations, this could result in a significant financial loss to us. We would also suffer a significant financial loss if an institution from which we purchased foreign currency exchange contracts and swaps, interest rate swaps, or annuities for our pension plans, or the counterparty to our TRS Agreement, defaults on their contractual obligations. With respect to our financial market activities, we have adopted a policy of dealing only with counterparties we deem to be creditworthy to help mitigate the risk of financial loss from defaults. Adjustments are made to our allowance for credit losses each period in connection with our ongoing credit risk assessments. See note 5. Liquidity risk: Liquidity risk is the risk that we may not have cash available to satisfy our financial obligations as they come due. We manage liquidity risk through maintenance of cash on hand and access to the various financing arrangements described in notes 5 and 8. Hedging activities: The tables below present information regarding the fair values of derivative instruments and the effects of derivative instruments on our consolidated financial statements: Derivatives not designated as hedging instruments (economic hedges):
| Asset Derivatives |  | Liability Derivatives |
|  |  | Fair Value |  |  |  |  | Fair Value |
| Balance sheet classification |  | March 31, 2025 |  | December 31, 2024 |  | Balance sheet classification |  |  | March 31, 2025 |  | December 31, 2024 |
Foreign currency forward contracts | Other current assets |  | $ | 1.3 |  |  | $ | 8.9 |  |  | Other current liabilities |  |  | $ | 4.2 |  |  | $ | 13.1 |  |
TRS | Other current assets |  | — |  |  | 99.4 |  |  | Other current liabilities |  |  | 18.3 |  |  | — |  |
Location of Loss (Gain) Recognized |  | Amount of Loss (Gain) Recognized in Income
|  | Three months ended March 31 |  |
|  | 2025 |  | 2024 |  |  |  |
Foreign currency forward contracts |  |  |  |  |  |  |  |
Cost of sales |  | $ | (0.3) |  |  | $ | 0.1 |  |  |  |  |
SG&A |  | 2.6 |  |  | 4.5 |  |  |  |  |
TRS |  |  |  |  |  |  |  |
Cost of sales |  | 7.5 |  |  | (12.8) |  |  |  |  |
SG&A |  | 11.6 |  |  | (18.7) |  |  |  |  |
Derivatives designated as cash flow hedges:
|  |  | Asset Derivatives |  |  |  |  |  |  | Liability Derivatives |  |  |
|  |  | Fair Value |  |  |  |  | Fair Value |  |  |
| Balance sheet classification |  | March 31, 2025 | December 31, 2024 |  |  |  | Balance sheet classification |  |  | March 31, 2025 | December 31, 2024 |  |  |
Foreign currency forward contracts (i) | Other current assets |  | $ | 2.6 |  | $ | 3.5 |  |  |  |  | Other current liabilities |  |  | $ | 8.1 |  | $ | 17.8 |  |  |  |
Interest rate swaps (ii) | Other current assets |  | 4.8 |  | 6.6 |  |  |  |  | Other current liabilities |  |  | — |  | — |  |  |  |
Interest rate swaps (ii) | Other non-current assets |  | — |  | — |  |  |  |  | Other non-current liabilities |  |  | 1.7 |  | — |  |  |  |
(i) In the next twelve months, we estimate that $3.1 of existing losses, net of tax, will be reclassified from AOCI into our consolidated statement of operations, to offset transactions denominated in foreign currencies. The maximum length of time we hedge our exposure to the variability in future cash flows for forecasted foreign currency transactions is 12 months. (ii) In the next twelve months, we estimate that $4.8 of existing gains, net of tax, will be reclassified from AOCI into our consolidated statement of operations, to offset interest payments. The maximum length of time that we hedge our exposure to the variability in future cash flows for forecasted interest payments is 4.2 years.
Loss (gain) Reclassified from AOCI into Income | Three months ended March 31
(see note 10 for activities recorded in AOCI for the periods indicated) | 2025 |  | 2024
Foreign currency forward contracts |  |  |
Cost of sales | $ | 3.7 |  |  | $ | 2.5 |
SG&A | 0.9 |  |  | 0.3 |
Miscellaneous expense | — |  |  | 3.6 |
Interest rate swaps |  |  |
Finance costs | $ | (1.8) |  |  | $ | (3.1) |
Miscellaneous expense | 1.3 |  |  | 2.7 |

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