FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

3 Months Ended

Mar. 31, 2025

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(8) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

In accordance with Accounting Standards Codification ("ASC") 820, the Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. These tiers include the following:

Level 1 — inputs include observable unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 — inputs include other than quoted prices in active markets that are either directly or indirectly observable

Level 3 — inputs include unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

In determining fair value, the Company uses various valuation techniques and prioritizes the use of observable inputs. The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the instrument. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management judgment. For other financial instruments, pricing inputs are less observable in the marketplace and may require management judgment.

Recurring fair value measurements

A summary of the Company’s financial instruments recognized at fair value, and the fair value measurements used are as follows:


		As of March 31, 2025
	Balance Sheet Location	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Unobservable inputs (Level 3)
Assets:
Cash	Cash and cash equivalents	$	1,467.3	$	1,467.3	$	—	$	—
Interest rate swaps	Other current assets	28.5		—		28.5		—

Economic hedges	Other current assets	2.3		—		2.3		—
Interest rate swaps	Other noncurrent assets	22.6		—		22.6		—
Total assets		$	1,520.7	$	1,467.3	$	53.4	$	—

Liabilities:

Foreign currency exchange forwards	Accrued expenses and other liabilities	$	3.7	$	—	$	3.7	$	—
Total liabilities		$	3.7	$	—	$	3.7	$	—


		As of December 31, 2024
	Balance Sheet Location	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Unobservable inputs (Level 3)
Assets:
Cash	Cash and cash equivalents	$	1,227.6	$	1,227.6	$	—	$	—
Interest rate swaps	Other current assets	30.3		—		30.3		—
Economic hedges	Other current assets	9.8		—		9.8		—
Interest rate swaps	Other noncurrent assets	33.3		—		33.3		—
Total assets		$	1,301.0	$	1,227.6	$	73.4	$	—

Liabilities:


Foreign currency exchange forwards	Accrued expenses and other liabilities	$	8.8	$	—	$	8.8	$	—
Total liabilities		$	8.8	$	—	$	8.8	$	—

Interest rate swaps — From time to time the Company may enter into derivative financial instruments designed to hedge the variability in interest expense on floating rate debt. Derivatives are recognized as assets or liabilities in the Unaudited Condensed Consolidated Balance Sheets at their fair value. When the derivative instrument qualifies as a cash flow hedge changes in the fair value are deferred through other comprehensive income depending on the effectiveness of the instrument.

The Company uses interest rate swaps to manage the interest rate risk of the Company’s total debt portfolio and related overall cost of borrowing. At both March 31, 2025 and December 31, 2024, interest rate swap agreements designated as cash flow hedges effectively swapped a notional amount of $1,000.0 of SOFR-based floating rate debt for fixed rate debt. The Company’s interest rate swaps mature in March 2027. During the three months ended March 31, 2025, and 2024 the Company recognized $8.3 and $10.7, respectively, within “Interest expense, net” on the Unaudited Condensed Consolidated Statements of Earnings (Loss). At March 31, 2025, the Company expects approximately $28.5 of pre-tax net gains on cash flow hedges will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.

The interest rate swaps are valued using the SOFR yield curves at the reporting date and are classified in Level 2. Counterparties to these contracts are highly rated financial institutions. The fair values of the Company’s interest rate swaps are adjusted for nonperformance risk and creditworthiness of the counterparty through the Company’s credit valuation adjustment (“CVA”). The CVA is calculated at the counterparty level utilizing the fair value exposure at each payment date and applying a weighted probability of the appropriate survival and marginal default percentages.

Foreign currency exchange forwards - The Company may enter into derivative financial instruments designed to hedge the exposure to changes in foreign currency exchange rates. Derivatives are recognized as assets or liabilities in the Unaudited Condensed Consolidated Balance Sheets at their fair value. The duration of the derivatives are generally less than one year. The Company values foreign currency exchange swaps using broker quotations or market transactions on the listed or over-the-counter market, as such, these derivative instruments are classified in Level 2. When the derivative instrument qualifies as a cash flow hedge changes in the fair value are deferred through other comprehensive income depending on the effectiveness of the instrument. The Company reclassifies the gain or loss associated with the cash flow hedges into earnings when the underlying exposure is recognized. At March 31, 2025 and 2024, we have derivative instruments which hedge our exposure to certain foreign currency exchange rates with a notional amount of $93.0 and $118.0, respectively. For the three months ended March 31, 2025 there was $4.7 in realized losses associated with the foreign currency exchange swaps within "Cost of sales - products" on the Unaudited Condensed Consolidated Statements of Earnings (Loss). For the three months ended March 31, 2024 there was no realized gain associated with the foreign currency exchange swaps.

Economic hedges - At March 31, 2025 and 2024 we have derivative instruments which hedge our purchases of aluminum at 7,500.0 and 6,090.0 metric tons, respectively, and copper with notional amounts of 5,320.0 and 5,140.0 metric tons, respectively. The Company values these instruments using broker quotations, market transactions or option pricing model based on observable market inputs, as such, these derivative instruments are classified in Level 2. These derivative instruments are treated as economic hedges and for the three months ended March 31, 2025 and 2024 the Company recognized mark-to-market loss of $0.3 and gain of $0.7, respectively, within "Other operating expense (income)" on the Unaudited Condensed Consolidated Statement of Earnings (Loss).

Private warrants — On December 6, 2024, Cote SPAC I LLC exercised its remaining 5,266,667 warrants on a cashless basis pursuant to the agreement governing the warrants, in exchange for which the Company issued 4,812,521 shares of Class A common stock. Prior to exercise, the fair value of the private warrants were considered a Level 2 valuation and were determined using the Black-Sholes-Merton valuation model. The Company recognized a loss of $176.6 for the three months ended March 31, 2024 in "Change in the fair value of warrant liabilities" on the Unaudited Condensed Consolidated Statement of Earnings (Loss) associated with the mark-to-market adjustment on the 5,266,667 previously outstanding private warrants. As of March 31, 2025, there were no outstanding private warrants.

Net investment hedge — From time to time the Company designates certain intercompany debt to hedge a portion of its investment in foreign subsidiaries and affiliates. The net impact of translation adjustments from these hedges was $0.1 and, $21.3 respectively, for the three months ended March 31, 2025 and 2024 and is included in “Foreign currency translation” in the Unaudited Condensed Consolidated Statement of Other Comprehensive Income (Loss). As of March 31, 2025 and 2024, $24.1 and $244.9, respectively, of the Company’s intercompany debt was designated to hedge investments in certain foreign subsidiaries and affiliates.

Other fair value measurements

The Company determines the fair value of debt using Level 2 inputs based on quoted market prices. The following table presents the estimated fair value and carrying value of long-term debt, including the current portion of long-term debt as of March 31, 2025 and December 31, 2024.


	March 31, 2025				December 31, 2024
	Fair Value		Par Value (1)		Fair Value		Par Value (1)
Term Loan due 2027	$	2,086.5	$	2,091.7	$	2,097.0	$	2,097.0
Senior Secured Notes due 2028	807.8		850.0		802.4		850.0

(1)See “Note 5 — Debt” for additional information.