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Foreign Currency Forward Contracts
6 Months Ended
Jun. 30, 2023
Foreign Currency [Abstract]  
Foreign Currency Forward Contracts

Note 13 – Foreign Currency Forward Contracts

 

The Company’s operations and expenditures in its normal course of business are subject to opportunities and risks related to foreign currency fluctuations. The Company utilizes foreign currency forward contracts to protect against downward currency exposure by

hedging Mexican Peso denominated expenses against the risk of variability in foreign currency exchange rates between the Mexican Peso and the U.S. Dollar.

 

During the three and six months ended June 30, 2023, the Company entered for the first time into forward contracts to hedge the Company’s anticipated and probable Mexican Peso denominated expenses against the foreign currency rate exposure. The contracts have terms between one and 12 months and require the Company to exchange currencies at agreed-upon rates at each settlement date. The counterparties to the contracts consist of a limited number of major domestic and international financial institutions. The Company classifies these contracts as cash flow hedges in accordance with ASC 815, Derivatives and Hedging.

 

The Company will assess the assumed effectiveness and fair value of the contracts at each reporting period. The Company records unrealized gains or losses related to changes in the fair value of the forward contracts in other comprehensive income as long as the contracts are assumed to be effective. Amounts accumulated in other comprehensive income (loss) are reclassified to the consolidated statement of operations when the hedged item impacts earnings or upon determination that the contract is no longer assumed to be effective. The amounts accumulated in other comprehensive income were minimal during the three and six months ended June 30, 2023. The Company has not recorded any realized gains or losses in earnings related to the forward contracts during the three and six months ended June 30, 2023. The Company did not enter into forward contracts in 2022.