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Fair Value Measurements and Derivative Instruments | 6 Months Ended
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Jun. 30, 2026
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. We use various derivative financial instruments, primarily foreign currency derivatives 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 and first six months of 2026, 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 Accumulated Other Comprehensive Loss (“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. 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 June 30, 2026 and December 31, 2025 were as follows:
| June 30, 2026 |  | December 31, 2025
(Dollars in thousands) | Notional Amount |  | Notional Amount
Derivative instruments designated as hedges: |  |  |
Foreign currency derivatives | $ | 21,697 |  |  | $ | — |
Derivative instruments not designated as hedges: |  |  |
Foreign currency derivatives | $ | 30,668 |  |  | $ | 35,498 |
The fair value of our outstanding derivatives designated as hedges was a pre-tax unrealized loss of $0.5 million as of June 30, 2026, which was recorded in other accrued liabilities on the Condensed Consolidated Balance Sheets. As of June 30, 2026, net realized pre-tax losses of $0.6 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 second quarter or first six months of 2026 or 2025. The pre-tax realized gains 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 June 30, 2026 and 2025:
|  |  |  | Amount of Gain Recognized
|  | Location of Realized Gain Recognized in the Condensed Consolidated Statement of Operations |  | Three Months Ended June 30,
(Dollars in thousands) |  |  | 2026 |  | 2025
Derivatives designated as cash flow hedges: |  |  |  |
Foreign currency derivatives |  | Cost of goods sold |  | $ | (4) |  |  | $ | (188) |
|  |  |  | Amount of Gain Recognized
|  | Location of Realized Gain Recognized in the Condensed Consolidated Statement of Operations |  | Six Months Ended June 30,
(Dollars in thousands) |  |  | 2026 |  | 2025
Derivatives designated as cash flow hedges: |  |  |  |
Foreign currency derivatives |  | Cost of goods sold |  | $ | (15) |  |  | $ | (245) |
Pretax gains on non-designated derivatives recognized in earnings were as follows:
|  |  |  | Amount of Loss (Gain) Recognized
|  | Location of Loss (Gain) Recognized in the Condensed Consolidated Statement of Operations |  | Three Months Ended June 30,
(Dollars in thousands) |  |  | 2026 |  | 2025
Derivatives not designated as hedges: |  |  |  |
Foreign currency derivatives |  | Cost of goods sold |  | $ | 533 |  |  | $ | (292) |
|  |  |  | Amount of Loss (Gain) Recognized
|  | Location of Loss (Gain) Recognized in the Condensed Consolidated Statement of Operations |  | Six Months Ended June 30,
(Dollars in thousands) |  |  | 2026 |  | 2025
Derivatives not designated as hedges: |  |  |  |
Foreign currency derivatives |  | Cost of goods sold |  | $ | 296 |  |  | $ | (528) |
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 June 30, 2026 and December 31, 2025:
| June 30, 2026 |  | December 31, 2025
(Dollars in thousands) | Fair Value |  | Fair Value
Prepaid and other current assets |  |  |
Foreign currency derivatives | $ | 193 |  |  | $ | 217 |
Other accrued liabilities |  |  |
Foreign currency derivatives | (60) |  |  | (26) |
Net asset | $ | 133 |  |  | $ | 191 |

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