XML 25 R15.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Derivative Financial Instruments (Notes)
 3 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block] Derivatives and Hedging Activities
Hedge Accounting and Hedging Program

     The purposes of our cash flow hedging programs are to manage the foreign currency exchange rate risk on forecasted revenues and expenses denominated in currencies other than the functional currency of the operating unit, and to manage
floating interest rate risk associated with future interest payments on the variable-rate term loans issued in 2022. We do not issue derivatives for trading or speculative purposes.

    To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. The derivative instruments we utilize, including various foreign exchange contracts and interest rate swaps, are designated and qualify as cash flow hedges. Our derivative instruments are recorded at fair value on the condensed consolidated balance sheets and are classified based on the instrument's maturity date. We record gains or losses from changes in the fair values of the derivative instruments as a component of other comprehensive (loss) income and we reclassify those gains or losses into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. If the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related derivative instrument from accumulated other comprehensive loss into earnings immediately.

Foreign Currency Exchange Rate Risk

Foreign Exchange Forward Contracts

We enter into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency-denominated revenues and expenses to minimize the effect of foreign exchange rate movements on the related cash flows. These contracts are agreements to buy or sell a quantity of a currency at a predetermined future date and at a predetermined exchange rate. Our foreign exchange forward contracts hedge exposures principally denominated in Mexican Pesos ("MXN"), Euros, Czech Koruna ("CZK"), Japanese Yen ("JPY"), Swedish Krona ("SEK"), Danish Krone ("DKK"), Chinese Renminbi ("CNH"), Canadian Dollar ("CAD"), U.S. Dollar ("USD") and Australian Dollar ("AUD") and have varying maturities with an average term of approximately thirteen months. The total notional amount of these outstanding derivative contracts as of June 30, 2024 was $100.9 million, which included the notional equivalent of $20.6 million in Euros, $9.3 million in JPY, $4.9 million in CNH, $12.7 million in CAD, $10.0 million in AUD, $33.9 million in USD and $9.5 million in other foreign currencies, with terms currently through November 2025.

Floating Interest Rate Risk

In 2022, we entered into interest rate swaps to reduce the interest rate volatility on our variable-rate term loan A and variable-rate term loan B (see Note 16: Long-Term Debt). We exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount. Effective March 30, 2022, the term loan A swap, as amended, has an initial notional amount of $300.0 million, reducing to $150.0 million evenly on a quarterly basis excluding its final maturity on March 30, 2027. We pay a fixed rate of 1.32% and will receive the greater of 3-months USD Secured Overnight Financing Rate ("SOFR") or (0.15)%. The total notional amount of this outstanding derivative as of June 30, 2024 was approximately $228.9 million. Effective March 30, 2022, the term loan B swap, as amended, has an initial notional amount of $750.0 million, reducing to $46.9 million evenly on a quarterly basis through its final maturity on March 30, 2026. We pay a fixed rate of 1.17% and will receive the greater of 3-months USD SOFR or 0.35%. The total notional amount of this outstanding derivative as of June 30, 2024 was approximately $328.1 million.

In June 2023, we entered into an additional interest rate swap that hedges both term loan A and term loan B interest payments. The total notional amount of the swap is $300.0 million. The hedge matures on June 30, 2028. We pay a fixed rate of 3.88% and will receive 3-months USD SOFR.

These swaps effectively convert the relevant portion of the floating-rate term loans to fixed rates.
    
The following table presents the fair values of our derivative instruments included within the Condensed Consolidated Balance Sheets (in thousands):
Derivatives Designated as Cash Flow Hedging Instruments
Condensed Consolidated Balance Sheet LocationForeign Exchange ContractsInterest Rate SwapsGross Derivatives
As of June 30, 2024
Prepaid expenses and other current assets$3,623 $21,006 $24,629 
Other assets99 9,584 9,683 
Total assets$3,722 $30,590 $34,312 
Accrued liabilities$1,473 $— $1,473 
Other long-term liabilities314 — 314 
Total liabilities$1,787 $— $1,787 
As of December 31, 2023
Prepaid expenses and other current assets$6,785 $23,065 $29,850 
Other assets673 4,876 5,549 
Total assets$7,458 $27,941 $35,399 
Accrued liabilities$2,590 $— $2,590 
Other long-term liabilities240 — 240 
Total liabilities$2,830 $— $2,830 


We recognized the following (loss) gains on our derivative instruments designated as cash flow hedges in other comprehensive income before reclassifications to net loss (in thousands):
Gain (Losses) Recognized in Other Comprehensive Income
Three months ended
June 30,		Six months ended
June 30,
2024202320242023
Derivatives designated as cash flow hedging instruments:
Foreign exchange forward contracts$(3,965)$6,051 $975 $8,503 
Interest rate swaps4,512 11,324 17,905 8,740 
Total derivatives designated as cash flow hedging instruments$547 $17,375 $18,880 $17,243 

The following table presents the effects of our derivative instruments designated as cash flow hedges on the Condensed Consolidated Statements of Operations (in thousands):
Gains (Losses) Reclassified From Accumulated Other Comprehensive (Loss) Income into Net Loss
Three months ended
June 30,		Six months ended
June 30,
Location of Gains (Losses) Recognized in Net Loss2024202320242023
Derivatives designated as cash flow hedging instruments:
Foreign exchange forward contractsTotal revenues$633 $473 $1,333 $(1,448)
Foreign exchange forward contractsCost of goods sold1,059 2,316 2,339 3,816 
Foreign exchange forward contractsOther expense, net(1)— — — 229 
Foreign exchange forward contractsInterest expense(2)— — — 13 
Interest rate swapsInterest expense7,291 7,625 15,255 14,993 
Total derivatives designated as cash flow hedging instruments$8,983 $10,414 $18,927 $17,603 
_______________________________
(1)    Represents location of gain reclassified from accumulated other comprehensive loss into other expense, net as a result of ineffectiveness.
(2)    Represents location of gain reclassified from accumulated other comprehensive loss into interest expense as a result of forecasted transactions no longer probable of occurring.
As of June 30, 2024, we expect an estimated $2.1 million in deferred gains on the outstanding foreign exchange contracts and an estimated $21.9 million in deferred gains on the interest rate swaps will be reclassified from accumulated other comprehensive loss to net income during the next 12 months concurrent with the underlying hedged transactions also being reported in net income.