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Note 5 - Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.	Derivative Instruments and Hedging Activities

Commodities

The Company is exposed to price fluctuations in commodities including steel, copper and aluminum; and periodically utilizes commodity derivatives to mitigate the impact of these potential price fluctuations on its financial results. These derivatives typically have maturities of less than eighteen months.

Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded in cost of goods sold in the Company’s consolidated statements of comprehensive income. Net pre-tax gains recognized were not material for the years ended December 31, 2023, 2022 and 2021, respectively. At December 31, 2023 and 2022, the Company had no commodity contracts outstanding.

Foreign Currencies

The Company is exposed to foreign currency exchange risk as a result of transactions denominated in currencies other than the U.S. Dollar. The Company periodically utilizes foreign currency forward purchase and sales contracts to manage the volatility associated with certain foreign currency purchases and sales in the normal course of business. Contracts typically have maturities of twelve months or less.

Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded in “other, net” in the Company’s consolidated statements of comprehensive income. Net pre-tax gains (losses) recognized for the years ended December 31, 2023, 2022 and 2021 were not material. As of December 31, 2023 and 2022, the Company had 53 and 34 foreign currency contracts outstanding, respectively.

Interest Rate Swaps

In 2017, the Company entered into twenty interest rate swap agreements, the final four of which expired in May 2023. In March 2020, the Company entered into three additional interest rate swap agreements which were still outstanding as of December 31, 2023.

In June 2022, in conjunction with the amendments to the Company's credit agreements discussed further in Note 12, “Credit Agreements,” to the consolidated financial statements, the Company amended its interest rate swaps to match the underlying debt and reconfirmed hedge effectiveness. The Company formally documented all relationships between interest rate hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges and therefore, the effective portions of their gains or losses are reported as a component of accumulated other comprehensive loss (AOCL) in the consolidated balance sheets.

The amount of after-tax unrealized gains (losses) recognized for the years ended December 31, 2023, 2022 and 2021 were $(8,004), $38,494, and $20,529, respectively. The cash flows of the swaps are recognized as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in earnings.

Fair Value

The following table presents the fair value of the Company’s derivatives:

		December 31,
		2023			2022
Foreign currency contracts		$	(147)		$	94
Interest rate swaps			38,601			49,279

The fair values of the interest rate swaps are included in operating lease and other assets in the consolidated balance sheet as of December 31, 2023 and 2022. Excluding the impact of credit risk, the fair value of the derivative contracts as of December 31, 2023, and December 31, 2022, is an asset of $39,796 and $51,184, respectively, which represents the net amount the Company would receive to exit all of the agreements on that date.