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DERIVATIVES | 3 Months Ended
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Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company’s risk management strategy includes the use derivative financial instruments to manage its exposure to interest rate movements and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates primarily to offset the earnings impact related to inventory purchases. The Company does not enter into derivative transactions for trading purposes. The Company classifies cash flows from its derivative transactions as cash flows from operating activities in the consolidated statements of cash flows. The Company’s derivatives expose it to credit risks from possible non-performance by counterparties. The Company has limited its credit risk by entering into derivative transactions exclusively with investment-grade rated financial institutions and monitors the creditworthiness of these financial institutions on an ongoing basis. The Company utilizes standard counterparty master netting agreements that net certain foreign currency and interest rate swap transactions in the event of the insolvency of one of the parties to the transaction. These master netting arrangements permit the Company to net amounts due from the Company to counterparty with amounts due to the Company from the same counterparty. Although all of the Company’s recognized derivative assets and liabilities are subject to enforceable master netting arrangements, the Company has elected to present these assets and liabilities on a gross basis. The Company does not anticipate non-performance by any of its counterparties. Interest Rate Swap Agreements To manage its exposures to interest rate movements, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In March 2024 and October 2024, the Company entered into interest rate swap agreements, each with an aggregate notional value of $25.0 million and expire in August 2027. These non-designated interest rate swaps serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The Company’s total outstanding notional value of interest rate swaps was $50.0 million at March 31, 2025. Foreign Exchange Contracts To reduce the impact of changes in foreign currency exchange rates on its results, from time to time the Company is a party to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases. The Company designates these contracts for accounting purposes as cash flow hedges. The Company purchases foreign currency forward contracts with terms less than 18 months. The aggregate gross notional value of foreign exchange contracts at March 31, 2025 was $9.3 million. The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows (in thousands):
Derivatives designated as hedging instruments | Balance Sheet Location |  | March 31, 2025 |  | December 31, 2024
Foreign exchange contracts | Prepaid expenses and other current assets |  | $ | 20 |  |  | $ | 256 |
| Accrued expenses |  | 13 |  |  | — |
Derivatives not designated as hedging instruments | Balance Sheet Location |  | March 31, 2025 |  | December 31, 2024
Interest rate swaps | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 102 |
| Other assets |  | 144 |  |  | 379 |
| Other long-term liabilities |  | 344 |  |  | 154 |
The fair values of the interest rate swaps have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The fair values of the foreign exchange contracts were based on Level 2 observable inputs using quoted market prices for similar assets in an active market. The amounts of gains and losses, realized and unrealized, related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income, net of taxes, as follows (in thousands):
| Three Months Ended March 31, |  |
Derivatives designated as hedging instruments | 2025 |  | 2024 |  |  |  |
Foreign exchange contracts | $ | (129) |  |  | $ | 201 |  |  |  |  |
Realized gains and losses on foreign exchange contracts that are reported in other comprehensive income are reclassified into cost of sales as the underlying inventory purchased is sold. During the three months ended March 31, 2025 and 2024, the Company reclassified $0.1 million of cash flow hedges in accumulated other comprehensive losses to earnings, related to foreign exchange contracts recognized in cost of sales. At March 31, 2025, the estimated amount of existing net gains expected to be reclassified into earnings within the next 12 months was below $0.1 million. Interest and mark to market losses related to the Company’s derivative financial instruments not designated as hedging instruments that were recognized in earnings are as follows (in thousands):
|  |  | Three Months Ended March 31, |  |
Derivatives not designated as hedging instruments | Location of gain (loss) |  | 2025 |  | 2024 |  |  |  |
Interest rate swaps | Mark to market loss on interest rate derivatives |  | $ | (527) |  |  | $ | (174) |  |  |  |  |
| Interest expense |  | 168 |  |  | 221 |  |  |  |  |
|  |  | $ | (359) |  |  | $ | 47 |  |  |  |  |

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