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Note 5 - Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.	Derivative Instruments and Hedging Activities

For each foreign currency forward contract entered into in which the Company seeks to obtain cash flow hedge accounting treatment, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. This process includes linking all foreign currency forward contracts to specific firm commitments or forecasted transactions and designating the foreign currency forward contracts as cash flow hedges. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the foreign currency forward contracts that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The effective portion of these hedged items is reflected in Unrealized gain (loss) on cash flow hedges on the Condensed Consolidated Statements of Comprehensive Income. If it is determined that a foreign currency forward contract is not highly effective, or that it has ceased to be a highly effective hedge, the Company is required to discontinue hedge accounting with respect to that foreign currency forward contract prospectively.

As of March 31, 2022, the total notional amount of the foreign currency forward contracts designated as cash flow hedges was $15.9 million (CAD$19.8 million) and $9.9 million (EUR$9.0 million). As of December 31, 2021, the total notional amount of the foreign currency forward contracts designated as cash flow hedges was $19.0 million (CAD$24.1 million). As of March 31, 2022, the Company’s foreign currency forward contracts mature at various dates through April 2023 and are subject to an enforceable master netting arrangement.

As of March 31, 2022 and December 31, 2021, all foreign currency forward contracts were designated as cash flow hedges. Gains (losses) recognized in Net sales from foreign currency forward contracts not designated as hedging instruments were approximately $0 for the three months ended March 31, 2022 and 2021. There were no gains (losses) recognized in Property and equipment from foreign currency forward contracts not designated as hedging instruments for the three months ended March 31, 2022 and 2021. As of March 31, 2022, unrealized pretax losses on outstanding foreign currency forward contracts in Accumulated other comprehensive loss was $0.6 million, of which $0.2 million is expected to be reclassified to Net sales within the next twelve months as a result of underlying hedged transactions also being recorded in Net sales and $0.2 million is expected to be reclassified to Property and equipment within the next twelve months as a result of underlying hedged transactions also being recorded in Property and equipment. See Note 10, “Accumulated Other Comprehensive Loss” for additional information regarding foreign currency forward contract gains and losses.

On March 23, 2022, the Company entered into an interest rate swap transaction which will begin April 29, 2022, at a notional amount of $40.0 million, a fixed rate of 1.94%, and a maturity date of April 30, 2024.