Derivatives

6 Months Ended

Jun. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 15 – Derivatives

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 currently utilizes foreign currency forward contracts to protect against downward currency exposure by hedging Mexican Peso denominated expenses against the risk of volatility in foreign currency exchange rates between the Mexican Peso and the U.S. Dollar.

During 2023 and 2024, the Company entered 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 domestic and international financial institutions. The Company classifies these contracts as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The Company does not have any non-designated derivatives.

The Company assesses the assumed effectiveness of the contracts at each reporting period. The foreign currency derivatives are recorded on the balance sheet at fair value. 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 condensed consolidated statements of operations on the same line as the items being hedged when the hedged item impacts earnings or upon determination that the contract is no longer assumed to be effective.

The notional amounts of outstanding foreign currency derivatives are as follows:


	June 30,		December 31,
Notional Amount	2024		2023
Derivative instruments designated as hedges:
Foreign currency derivatives	$	14,705	$	11,562

The fair value of outstanding foreign currency derivatives designated as hedges are as follows:


	June 30,		December 31,
Fair Value	2024		2023
Other current liabilities:
Foreign currency derivatives	$	661	$	-
Prepaid expenses:
Foreign currency derivatives	$	-	$	606

The pre-tax realized gain on foreign currency derivatives is recognized in the condensed consolidated statements of operations as follows:


		Amount of (Gain) Recognized					Amount of (Gain) Recognized
		Three Months Ended June 30,					Six Months Ended June 30,
	Location of Realized (Gain) Recognized in the Condensed Consolidated Statements of Operations	2024			2023		2024			2023
Derivative instruments designated as cash flow hedges:
Foreign currency derivatives	Cost of sales	$	(290	)	$	-	$	(520	)	$	-