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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 9 Months Ended
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
We are exposed to market risk related to potential fluctuations in foreign currency exchange rates and interest rates. We use derivative financial instruments to mitigate the financial impact of exposure to these risks.
Accounting for derivative financial instruments is governed by ASC Topic 815, Derivatives and Hedging, (“ASC 815”). In accordance with ASC 815, we record our derivative instruments at fair value as either assets or liabilities in the Consolidated Balance Sheets. Changes in the instruments’ fair value are accounted for based on their intended use. Gains and losses on derivatives that are designated and qualify for cash flow hedge accounting are recorded as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the investment is partially or completely liquidated. The changes in the fair value of derivatives not designated as hedging instruments and those which are no longer effective as hedging instruments, are recognized immediately in earnings.
FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS
Our New Zealand subsidiary’s domestic sales and operating expenses are predominately denominated in New Zealand dollars, while its export sales, shareholder distributions and ocean freight payments are predominately denominated in U.S. dollars. To the extent New Zealand dollar costs exceed New Zealand dollar revenues (the “foreign exchange exposure”), the New Zealand subsidiary manages the foreign exchange exposure through the use of derivative financial instruments. It typically hedges a portion of export sales receipts to cover 50% to 90% of the projected foreign exchange exposure for the following 12 months, up to 75% for the forward 12 to 18 months and up to 50% for the forward 18 to 24 months. Additionally, it will occasionally hedge export sales receipts to cover up to 50% of the foreign exchange exposure for the forward 24 to 36 months and up to 25% of the foreign exchange exposure for the forward 36 to 48 months when the the New Zealand dollar is at a cyclical low versus the U.S. dollar. The New Zealand subsidiary’s trading operations typically hedge a portion of export sales receipts to cover the projected foreign exchange exposure for the following three months. As of September 30, 2024, foreign currency exchange contracts and foreign currency option contracts had maturity dates through July 2027.
Foreign currency exchange and option contracts hedging foreign currency risk qualify for cash flow hedge accounting. We may de-designate these cash flow hedge relationships in advance or at the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously in AOCI for de-designated hedges remains in AOCI until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings.
INTEREST RATE PRODUCTS
We are exposed to cash flow interest rate risk on our variable-rate debt and on anticipated debt issuances. We use variable-to-fixed interest rate swaps and forward-starting interest rate swap agreements to hedge this exposure. For these derivative instruments, we report the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassify them to earnings as interest expense in the same period in which the hedged interest payments affect earnings.
To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in AOCI and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. To the extent the associated hedged item is no longer effective, the gain or loss is reclassified out of AOCI to earnings immediately.
INTEREST RATE SWAPS
The following table contains information on the outstanding interest rate swaps as of September 30, 2024:
Outstanding Interest Rate Swaps (a)
Date Entered IntoTermNotional AmountRelated Debt FacilityFixed Rate of SwapBank Margin on Debt (b)Total Effective Interest Rate (c)
April 201610 years100,000 2016 Incremental Term Loan1.50 %1.75 %3.25 %
April 201610 years100,000 2016 Incremental Term Loan1.51 %1.75 %3.26 %
May 2021 (d)7 years200,000 
2021 Incremental Term Loan
0.67 %1.65 %2.32 %
December 2022 5 years100,000 
2022 Incremental Term Loan
3.72 %1.70 %5.42 %
April 2020 (e)4 years100,000 2015 Term Loan0.78 %1.60 %2.38 %
May 2020 (e)4 years50,000 2015 Term Loan0.64 %1.60 %2.24 %
May 2023 (e)4 years50,000 2015 Term Loan3.29 %1.60 %4.89 %
(a)All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.
(b)Includes the SOFR Credit Spread Adjustment component of 0.1%.
(c)Rate is before estimated patronage payments.
(d)Matured into an active interest rate swap on February 1, 2022.
(e)On August 1, 2024, our three forward-starting interest rate swaps with a total notional amount of $200 million matured into active interest rate swaps. See Note 6 — Debt for additional information.
The following tables demonstrate the impact, gross of tax, of our derivatives on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended
September 30,
Income Statement Location20242023
Derivatives designated as cash flow hedges:
Foreign currency exchange contractsOther comprehensive income (loss)$5,758 $1,752 
Other operating expense, net349 (1,796)
Foreign currency option contractsOther comprehensive income (loss)2,143 (26)
Other operating expense, net5 (196)
Interest rate productsOther comprehensive income (loss)(14,949)12,381 
Interest expense, net(6,822)(4,810)
Nine Months Ended
September 30,
Income Statement Location20242023
Derivatives designated as cash flow hedges:
Foreign currency exchange contractsOther comprehensive income (loss)$1,903 $5,753 
Other operating expense, net1,742 (5,801)
Foreign currency option contractsOther comprehensive income (loss)1,123 (858)
Other operating expense, net13 (244)
Interest rate productsOther comprehensive income (loss)5,273 20,416 
Interest expense, net(21,379)(12,587)
During the next 12 months, the amount of the September 30, 2024 AOCI balance, net of tax, expected to be reclassified into earnings is a gain of approximately $17.9 million. The following table contains details of the expected reclassified amounts into earnings:
Amount expected to be reclassified into earnings in next 12 months
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts$2,169 
Foreign currency option contracts781 
Interest rate products (a)14,998 
Total estimated net gain on derivatives contracts$17,948 
(a)    These reclassified amounts are expected to fully offset variable interest rate payments made to debt holders, resulting in no net impact on our earnings or cash flows.
The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:
Notional Amount
September 30, 2024December 31, 2023
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts$122,900 $122,700 
Foreign currency option contracts126,000 98,000 
Interest rate swaps700,000 850,000 
Forward-starting interest rate swaps— 200,000 
    The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets at September 30, 2024 and December 31, 2023. Changes in balances of derivative financial instruments are recorded as operating activities in the Consolidated Statements of Cash Flows:
Location on Balance SheetFair Value Assets / (Liabilities) (a)
September 30, 2024December 31, 2023
Derivatives designated as cash flow hedges:
Foreign currency exchange contractsOther current assets$3,012 $1,175 
Other assets 3,549 2,405 
Other current liabilities— (664)
Foreign currency option contractsOther current assets1,193 342 
Other assets2,472 2,158 
Other current liabilities(108)(139)
Other non-current liabilities(850)(789)
Interest rate swapsOther current assets— 5,742 
Other assets40,737 37,983 
Other non-current liabilities(1,423)(546)
Forward-starting interest rate swapsOther assets— 12,790 
Other non-current liabilities— (8)
Total derivative contracts:
Other current assets$4,205 $7,259 
Other assets46,758 55,336 
Total derivative assets$50,963 $62,595 
Other current liabilities(108)(803)
Other non-current liabilities(2,273)(1,343)
Total derivative liabilities($2,381)($2,146)
(a)    See Note 8 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair value hierarchy.

OFFSETTING DERIVATIVES
Derivative financial instruments are presented at their gross fair values in the Consolidated Balance Sheets. Our derivative financial instruments are not subject to master netting arrangements, which would allow the right of offset.