XML 25 R12.htm IDEA: XBRL DOCUMENT

Note 4 - Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.	Derivative Instruments and Hedging Activities

In the normal course of business, the Company is exposed to interest rate and foreign currency exchange rate fluctuations. Consistent with the Company’s strategy for financial risk management, the Company has established a program that utilizes foreign currency forward contracts and interest rate swaps to offset the risks associated with the effects of these exposures.

For each derivative 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 derivatives to specific firm commitments or forecasted transactions and designating the derivatives as cash flow hedges. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives 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 derivative 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 derivative prospectively.

As of September 30, 2024, the total notional amount of the foreign currency forward contracts was $2.2 million (CAD$3.0 million) and $1.2 million (EUR€1.1 million), which included $1.5 million (CAD$2.1 million) and $1.2 million (EUR€1.1 million) of foreign currency forward contracts not designated as cash flow hedges. As of December 31, 2023, the total notional amount of the foreign currency forward contracts was $5.1 million (CAD$6.7 million) and $1.2 million (EUR€1.1 million), which included $4.9 million (CAD$6.4 million) and $1.2 million (EUR€1.1 million) of foreign currency forward contracts not designated as cash flow hedges. As of September 30, 2024, the Company’s foreign currency forward contracts mature at various dates through April 2025 and are subject to an enforceable master netting arrangement.

The Company has entered into interest rate swaps which effectively convert a portion of its variable-rate debt to fixed-rate debt and are designated as cash flow hedges. For the first cash flow hedge, the Company received floating interest payments monthly based on Secured Overnight Finance Rate (“SOFR”) and paid a fixed rate of 1.941% to the counterparty on the total notional amount of $6.7 million as of December 31, 2023, which amortized ratably on a monthly basis to zero by the April 2024 maturity date. For the second cash flow hedge, beginning April 3, 2023, the Company receives floating interest payments monthly based on the SOFR Average 30 day and pays a fixed rate of 2.96% to the counterparty on the total notional amount of $10.8 million and $13.0 million as of September 30, 2024 and December 31, 2023, respectively, which amortizes ratably on a monthly basis to zero by the April 2028 maturity date. For the third cash flow hedge, beginning June 30, 2024, the Company receives floating interest payments monthly based on SOFR and pays a fixed rate of 5.10% to the counterparty on the total notional amount of $28.0 million as of September 30, 2024, which amortizes ratably on a monthly basis to $20 million through December 2024, and matures in June 2025.

The following table summarizes the gains (losses) recognized on derivatives in the Condensed Consolidated Financial Statements (in thousands):

		*Three Months Ended September 30,*								*Nine Months Ended September 30,*
		*2024*				*2023*				*2024*				*2023*
Foreign currency forward contracts:
Net sales		$	(21	)		$	77			$	90			$	(601	)
Property and equipment			41				(22	)			41				(109	)

Interest rate swaps:
Interest expense			88				201				285				553
Total		$	108			$	256			$	416			$	(157	)

As of September 30, 2024, unrealized pretax losses on outstanding cash flow hedges in Accumulated other comprehensive loss was approximately $0. See Note 10, “Accumulated Other Comprehensive Loss” for additional quantitative information regarding foreign currency forward contract and interest rate swap gains and losses.