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Financial Instruments and Derivatives | 3 Months Ended
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Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments and Derivatives | Financial Instruments and Derivatives The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value.
|  | March 31, 2024 |  | December 31, 2023
|  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Long-term debt, net of current portion |  | $ | 2,630,424 |  |  | $ | 2,485,816 |  |  | $ | 3,035,868 |  |  | $ | 2,890,009 |
The carrying value of cash and cash equivalents and short-term debt approximates fair value. The fair value of long-term debt is determined based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available to the Company for issues with similar terms and maturities which is considered a Level 2 fair value measurement. Cash Flow Hedges At March 31, 2024 and December 31, 2023, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. These contracts, w hich have maturities ranging from April 2024 to December 2024, qualify as cash flow hedges under U.S. generally accepted accounting principles (“GAAP”). For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. Cash flows from derivative financial instruments designated as cash flow hedges are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Commodity Cash Flow Hedges Certain derivative contracts entered into to manage the cost of anticipated purchases of natural gas and aluminum have been designated by the Company as cash flow hedges. At March 31, 2024, these contracts included natural gas swaps covering approximately 0.05 million m etric million British thermal units (“MMBTUs”). These contracts represented approximatel y 0.9% o f anticipated usage in North America for 2024. The Company also has certain natural gas hedges that it does not treat as cash flow hedges. See “Non-Designated Derivatives” below for a discussion of these hedges. At March 31, 2024, the Company had also designated swap contracts covering 355 metric tons of aluminum as cash flow hedges. The fair value of the Company’s commodity cash flow hedges netted to loss positions of $(66) and $(41) at March 31, 2024 and December 31, 2023, respectively. The amount of the loss included in accumulated other comprehensive loss at March 31, 2024 expected to be reclassified to the income statement during the next twelve months is $(66). Foreign Currency Cash Flow Hedges The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases expected to occur in 2024 and 2025. The net positions of these contracts at March 31, 2024 were as follows (in thousands):
Currency | Action | Quantity
Colombian peso | purchase | 16,966,782 |
Mexican peso | purchase | 429,499 |
Polish zloty | purchase | 98,802 |
Danish krone | purchase | 34,765 |
Swedish krona | sell | (4,855) |
Czech koruna | purchase | 86,121 |
Canadian dollar | purchase | 25,729 |
Euro | purchase | 1,744 |
Turkish lira | purchase | 43,173 |
Brazilian real | purchase | 41,819 |
British pound | sell | (800) |
The fair value of foreign currency cash flow hedges related to forecasted sales and purchases netted to gain positions of $1,697 and $1,502 at March 31, 2024 and December 31, 2023, respectively. Gains of $1,697 are expected to be reclassified from accumulated other comprehensive income to the income statement during the next twelve months. Net Investment Hedge During the fourth quarter of 2023, the Company became a party to cross-currency swap agreements with a total notional amount of $500,000 to effectively convert a portion of the Company’s fixed-rate U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreements, which have a maturity of December 18, 2026, provide for the Company to receive semi-annual interest payments in U.S. dollars at a fixed rate and to make semi-annual interest payments in euros at a fixed rate. The risk management objective of entering into the swap agreements is to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in euros. The agreements are designated as net investment hedges for accounting purposes. The gain or loss on the net investment hedge derivative instrument is included in the “Foreign currency translation” component of “Accumulated other comprehensive loss” until the net investment is sold, diluted, or liquidated. Interest payments received for the cross-currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in “Interest expense” in the Company’s Condensed Consolidated Statements of Income. The assumptions used in measuring fair value of the cross-currency swaps are considered level 2 inputs, which are based upon the Euro-to-U.S. dollar exchange rate market. The fair value of the Company’s net investment hedges was a gain position of $4,850 and a loss position of $5,073 at March 31, 2024 and December 31, 2023, respectively. A translation gain of $3,613 (net of income taxes of $1,237) and a translation loss of $3,779 (net of income taxes of $1,294) were reported as components of “Accumulated other comprehensive loss” within “Foreign currency items” at March 31, 2024 and December 31, 2023, respectively. As a result of continued strengthening of the U.S. dollar against the euro, as well as a reduction in the differential between U.S. and European interest rates, the fair value of the Company’s net investment hedge continued to appreciate into the month of April 2024. On April 15, 2024, subsequent to the end of the first quarter of 2024, the Company terminated the swap agreements and received a cash settlement of $11,634. The foreign currency translation gain of approximately $3,143, net of tax, will be included as a component of “Accumulated other comprehensive loss” in the second quarter of 2024. Following the unwind of the swaps, the Company entered into new cross-currency swap agreements with a total notional amount of $500,000 to effectively convert a portion of the Company’s fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The new swap agreements have a maturity of May 1, 2027. Non-Designated Derivatives The Company routinely enters into other derivative contracts which are not designated for hedge accounting treatment under ASC 815. As such, changes in fair value of these non-designated derivatives are recorded directly to income and expense in the periods that they occur. Cash flows from derivative financial instruments not designated as hedges are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Foreign Currency Hedges The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and foreign currency denominated receivables and payables. The net currency positions of these non-designated contracts at March 31, 2024, were as follows (in thousands):
Currency | Action | Quantity
Indonesian rupiah | purchase | 19,814,218 |
Colombian peso | purchase | 67,308,931 |
Mexican peso | purchase | 412,841 |
Canadian dollar | purchase | 7,981 |
Commodity Hedges The Company has entered into non-designated derivative contracts to manage the cost of a nticipated purchases of natural gas. At March 31, 2024, these contracts consisted of natural gas swaps covering approximately 6.6 million MMBTUs and represented approximately 87% and 33% of anticipated usage for 2024 and 2025, respectively. The fair value of the Company’s non-designated derivatives position was a loss of $(6,690) a nd $(6,790) at March 31, 2024 and December 31, 2023, respectively. The following table sets forth the location and fair values of the Company’s derivative instruments at March 31, 2024 and December 31, 2023:
Description |  | Balance Sheet Location |  | March 31, 2024 |  | December 31, 2023
Derivatives designated as hedging instruments: |  |  |  |  |  |
Commodity Contracts |  | Prepaid expenses |  | $ | 28 |  |  | $ | 67 |
Commodity Contracts |  | Accrued expenses and other |  | (94) |  |  | (108) |
Foreign Exchange Contracts |  | Prepaid expenses |  | 2,323 |  |  | 2,525 |
Foreign Exchange Contracts |  | Accrued expenses and other |  | (626) |  |  | (1,024) |
Net Investment Hedge |  | Prepaid expense |  | 4,192 |  |  | 5,567 |
Net Investment Hedge |  | Other assets |  | 744 |  |  | — |
Net Investment Hedge |  | Other liabilities |  | (86) |  |  | (10,640) |
Derivatives not designated as hedging instruments: |  |  |  |
Commodity Contracts |  | Prepaid expenses |  | $ | 103 |  |  | $ | 12 |
Commodity Contracts |  | Other assets |  | 250 |  |  | — |
Commodity Contracts |  | Accrued expenses and other |  | (6,666) |  |  | (6,782) |
Commodity Contracts |  | Other liabilities |  | (176) |  |  | — |
Foreign Exchange Contracts |  | Prepaid expenses |  | 5 |  |  | 130 |
Foreign Exchange Contracts |  | Accrued expenses and other |  | (206) |  |  | (159) |
While certain of the Company’s derivative contract arrangements with its counterparties provide for the ability to settle contracts on a net basis, the Company reports its derivative positions on a gross basis. There are no collateral arrangements or requirements in these agreements. The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three-month periods ended March 31, 2024 and April 2, 2023, excluding the amount of foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:
Description |  | Amount of Gain or (Loss) Recognized in OCI on Derivatives |  | Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income |  |  |  |
Derivatives in Cash Flow Hedging Relationships: |  |  |  |  |  |
Three-month period ended March 31, 2024 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | 561 |  |  | Net sales |  | $ | 436 |  |  |  |  |
|  |  |  | Cost of sales |  | (75) |  |  |  |  |
Commodity Contracts |  | $ | (25) |  |  | Cost of sales |  | $ | — |  |  |  |  |
Three-month period ended April 2, 2023 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | 3,613 |  |  | Net sales |  | $ | 1,062 |  |  |  |  |
|  |  |  | Cost of sales |  | (454) |  |  |  |  |
Commodity Contracts |  | $ | (77) |  |  | Cost of sales |  | $ | (32) |  |  |  |  |
Description |  | Gain or (Loss) Recognized |  | Location of Gain or (Loss) Recognized in Income Statement
Derivatives not Designated as Hedging Instruments: |  |  |  |
Three-month period ended March 31, 2024 |  |
Commodity Contracts |  | $ | (2,558) |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | 305 |  |  | Selling, general and administrative
Three-month period ended April 2, 2023 |  |
Commodity Contracts |  | $ | (9,708) |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | 2,137 |  |  | Selling, general and administrative
| Three-month period ended March 31, 2024 |  | Three-month period ended April 2, 2023
Description | Revenue | Cost of sales |  | Revenue | Cost of sales
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income | $ | 436 |  | $ | (75) |  |  | $ | 1,062 |  | $ | (486) |
Gain or (loss) on cash flow hedging relationships: |  |  |  |
Foreign exchange contracts: |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into net income | $ | 436 |  | $ | (75) |  |  | $ | 1,062 |  | $ | (454) |
Commodity contracts: |  |  |  |  |
Amount of gain reclassified from accumulated other comprehensive loss into net income | $ | — |  | $ | — |  |  | $ | — |  | $ | (32) |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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