Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Derivative instruments are accounted for at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use, designation and type of the derivative instrument. The Company does not designate any of its
derivatives as hedges and, as such, records all changes in fair values as a component of earnings.
Using derivative instruments means assuming counterparty credit risk. Counterparty credit risk relates to the loss the
Company could incur if a counterparty were to default on a derivative contract. The Company primarily deals with
investment grade counterparties and monitors its overall credit risk and exposure to individual counterparties. The
Company does not anticipate nonperformance by any counterparties. The amount of counterparty credit exposure is the
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unrealized gains, if any, on such derivative contracts. The Company does not require, nor does it post collateral, or security,
on such contracts.
The Company is exposed to certain risks relating to its ongoing business operations. As a result, the Company enters
into derivative transactions to manage these exposures. The primary risks managed through the use of derivative
instruments are fluctuations in interest rates, foreign currency exchange rates and commodity prices. Fluctuations in these
rates and prices can affect the Company’s operating results and financial condition. The Company manages the exposure to
these market risks through operating and financing activities and through the use of derivative financial instruments. The
Company does not enter into derivative financial instruments for trading or speculative purposes.
Interest Rate Risk
Borrowings outstanding under the Term Loan totaled $1,365.0 million at December 31, 2025 . Borrowings under the
Term Loan bear interest, at the option of the applicable Borrower, at a rate equal to an applicable margin plus (a) the
applicable base rate or (b) Term SOFR (both rates as determined in accordance with the Credit Agreement). As of
December 31, 2025 , the applicable margins for the Term Loan were 1.25% with respect to adjusted base rate loans and
2.25% with respect to Term SOFR loans. An assumed 10% increase/decrease in the current interest rate in effect at
December 31, 2025 would increase/decrease annual interest expense by $2.3 million on the non-hedged portion of the
borrowing.
On August 21, 2025 , the Company finalized an amendment to our Credit Agreement, which reduced the applicable
margin on the Term Loan and RCF. The result is an interest rate on our Term Loan of SOFR plus a margin of 2.25% and
an interest rate on our RCF of SOFR plus a margin of 2.25% . Additionally, the amendment contains opportunities for
further margin reductions contingent upon achieving improvements in our leverage ratio and rating agency upgrades.
Effective September 3, 2024 , the Company entered into a $600.0 million interest rate swap agreement to hedge a
portion of our interest rate risk related to our long-term borrowings. Under the swap, which matures on September 1, 2027 ,
the Company pays a fixed rate of 3.61% and receives or pays monthly interest payments based upon a comparison to the
one-month Term SOFR rate.
Effective April 1, 2025 , the Company entered into a $150.0 million interest rate swap agreement to hedge a portion of
our interest rate risk related to our long-term borrowings. Under the swap, which matures on April 3, 2028 , the Company
pays a fixed rate of 3.36% and receives or pays monthly interest payments based upon a comparison to the one-month
Term SOFR rate.
Foreign Currency Risk
The Company has manufacturing, sales, and distribution facilities in the Czech Republic, China and Thailand. The
Company also has various sales and distribution facilities in Brazil, France, Spain, Italy, Germany and the United Arab
Emirates. The Company also makes investments and enters into transactions denominated in foreign currencies. The vast
majority of the Company’s international sales from its domestic operations are denominated in U.S. dollars. However, the
Company is exposed to transactional and translational foreign exchange risk related to its foreign operations.
Regarding transactional foreign exchange risk, the Company from time to time enters into certain forward exchange
contracts to reduce the variability of the earnings and cash flow impacts of foreign denominated receivables and payables.
The Company does not designate these contracts as hedge transactions. Accordingly, the mark-to-market impact of these
contracts is recorded each period to current earnings. At December 31, 2025 and December 31, 2024 , the Company ha d no
outstanding foreign currency contracts.
The Company’s primary translation exchange risk exposures at December 31, 2025 were the euro, Czech koruna, and
Thai baht. Amounts invested in non-U.S. based subsidiaries are translated into U.S. dollars at the exchange rate in effect at
period end. The resulting translation adjustments are recorded in accumulated other comprehensive (loss)/income as
foreign currency translation adjustments.
Commodity Risk
The Company is subject to the effects of changing raw material and component costs caused by movements in
underlying commodity prices. The Company purchases raw materials and components containing various commodities
including nickel, zinc, aluminum and copper. The Company generally buys these raw materials and components based
upon market prices that are established with the vendor as part of the procurement process.
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From time to time, the Company enters into contracts with its vendors to lock in commodity prices for various periods
to limit its near-term exposure to fluctuations in raw material and component prices. In addition, the Company enters into
commodity forward contracts, for commodities such as nickel, copper and aluminum, to reduce the variability on its
earnings and cash flows of purchasing raw materials containing such commodities. The Company does not designate these
contracts as hedge transactions. Accordingly, the mark-to-market impacts of these contracts are recorded each period to
current earning s. At December 31, 2025 , the Company was managing $3.1 million notional value of nickel forward
contracts and less than $0.1 million of copper forward contracts. At December 31, 2024 , the Company was managing $1.7
million notional value of nickel forward contracts.
The Company presents its derivatives at gross fair values in the Company’s Consolidated Balance Sheets and does not
maintain derivative contracts which would require financial instrument or collateral balances.
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