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Fair Value Measurements and Derivative Instruments | 3 Months Ended
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Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Fair Value Measurements and Derivative Instruments | Fair Value Measurements and Derivative Instruments In the normal course of business, we are exposed to certain risks related to fluctuations in currency exchange rates, commodity prices and interest rates. We use various derivative financial instruments, primarily foreign currency derivatives, commodity derivative contracts, and interest rate swaps as part of our overall strategy to manage risks from these market fluctuations. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not anticipate nonperformance by any of the counterparties to our instruments. Foreign currency derivatives We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, are used to hedge global currency exposures such as foreign currency denominated debt, receivables, payables, sales and purchases. Foreign currency forward and swap contracts are used to mitigate the foreign exchange risk of balance sheet items. These derivatives are fair value hedges. Gains and losses from these derivatives are recorded in cost of goods sold and they are largely offset by the financial impact of translating foreign currency-denominated payables and receivables. In the second quarter of 2024, we entered into foreign currency derivatives with maturities of one month to 12 months in order to protect against the risk that cash flows associated with certain sales and purchases denominated in a currency other than the U.S. dollar will be adversely affected by future changes in foreign exchange rates. These derivatives are designated as cash flow hedges. The resulting unrealized gains or losses from these derivatives are recorded in AOCL and subsequently, when realized, are reclassified to net sales or cost of goods sold in the Condensed Consolidated Statements of Operations when the hedged exposures affect earnings. Commodity derivative contracts From time to time, we enter into commodity derivative contracts for refined oil products. These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. The unrealized gains or losses related to commodity derivative contracts designated as cash flow hedges are recorded in AOCL and subsequently, when realized, are reclassified to the Condensed Consolidated Statement of Operations when the hedged item impacts earnings, which is when the finished product is sold. Interest rate swap contracts We have utilized interest rate swaps in the past to limit exposure to market fluctuations on our variable-rate debt. For each derivative agreement that is designated as a cash-flow hedge, the unrealized gain or loss is recorded in AOCL and, when realized, is recorded to interest expense. Upon discontinuance of a designated cash-flow hedging relationship, when interest payments are still probable of occurring, the fair value at the date of discontinuance is deferred into AOCL and amortized into interest expense based upon the term of the cash-flow hedging relationship. All derivatives are recorded on the balance sheet at fair value. If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in AOCL until the hedged item is recognized in earnings. The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through earnings. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The fair values will also be classified as short-term or long-term depending upon their maturity dates. The fair value of all of our derivatives was determined using Level 2 inputs. The notional amounts of our outstanding derivative instruments as of March 31, 2025 and December 31, 2024 were as follows:
| March 31, 2025 |  | December 31, 2024
| Notional Amount |  | Notional Amount
| (Dollars in thousands)
Derivative instruments not designated as hedges: |  |  |
Foreign currency derivatives | $ | 14,747 |  |  | $ | 11,918 |
As of March 31, 2025, net realized pre-tax gains of $0.2 million related to our foreign currency derivatives were reported in AOCL and will be released to earnings within the next 12 months. No ineffectiveness expense was recorded in the first quarter of 2025 or 2024. The pre-tax realized (gains) losses on designated cash flow hedges are recognized in the Statements of Operations when the hedged item impacts earnings and were as follows for the periods ended March 31, 2025 and 2024:
|  |  |  | Amount of Gain Recognized
|  | Location of Realized Gain Recognized in the Condensed Consolidated Statement of Operations |  | Three Months Ended March 31,
|  |  | 2025 |  | 2024
Derivatives designated as cash flow hedges: |  |  |  | (Dollars in thousands)
Foreign currency derivatives |  | Cost of goods sold |  | $ | (57) |  |  | $ | (68) |
Commodity derivative contracts |  | Cost of goods sold |  | — |  |  | (2,462) |
Interest rate swap contracts |  | Interest expense |  | — |  |  | (2,737) |
Pretax gains and losses on non-designated derivatives recognized in earnings were as follows:
|  |  |  | Amount of (Gain)/Loss Recognized
|  | Location of (Gain)/Loss Recognized in the Condensed Consolidated Statement of Operations |  | Three Months Ended March 31,
|  |  | 2025 |  | 2024
Derivatives not designated as hedges: |  |  |  | (Dollars in thousands)
Foreign currency derivatives |  | Cost of goods sold, other (income) expense, net |  | $ | (236) |  |  | $ | 127 |
The following table summarizes the fair value of our outstanding derivatives not designated as hedges (on a gross basis) and balance sheet classification as of March 31, 2025 and December 31, 2024:
| March 31, 2025 |  | December 31, 2024
| Fair Value |  | Fair Value
| (Dollars in thousands)
Prepaid and other current assets |  |  |
Foreign currency derivatives | 237 |  |  | 296 |
Other accrued liabilities |  |  |
Foreign currency derivatives | (43) |  |  | (248) |
Net asset | $ | 194 |  |  | $ | 48 |

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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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