Financial Instruments and Derivative Financial Instruments

6 Months Ended

Jun. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Financial Instruments and Derivative Financial Instruments

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt, excluding finance leases, were determined using current rates offered for similar obligations taking into account company credit risk. This valuation methodology is Level 2 as defined in the fair value hierarchy. At June 30, 2025, the carrying value and fair value of revolving credit agreements and long-term debt, excluding finance leases, was $450.2 million and $448.3 million, respectively. At December 31, 2024, the carrying value and fair value of revolving credit agreements and long-term debt, excluding finance leases, was $417.3 million and $416.8 million, respectively.

Derivative Financial Instruments

The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in non-functional currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales.

The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company's exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are generally recognized in cost of sales.

The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and the associated variable rate financings are predominately based upon the one-month Secured Overnight Financing Rate. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense.

Cash flows from hedging activities are reported in the unaudited condensed consolidated statements of cash flows with the same classification as the hedged item, generally as a component of cash flows from operations.

The Company measures its derivatives at fair value on a recurring basis using significant observable inputs. This valuation methodology is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates yield curves and foreign currency spot rates to value its derivatives and also incorporates the effect of the Company's and its counterparties' credit risk into the valuation.

The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges.

Foreign Currency Derivatives: The Company held forward foreign currency exchange contracts with total notional amounts of $0.7 billion and 0.8 billion at June 30, 2025 and December 31, 2024, respectively, primarily denominated in euros, U.S. dollars, Japanese yen, Chinese renminbi, Mexican pesos, British pounds, Swedish kroner and Australian dollars. The fair value of these contracts approximated a net asset of $11.1 million and a net liability of $18.5 million at June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025 and December 31, 2024, there was no material ineffectiveness of forward foreign currency exchange contracts that qualify for hedge accounting. Forward foreign currency exchange contracts that qualify for hedge accounting are generally used to hedge transactions expected to occur within the next 36 months. The mark-to-market effect of forward foreign currency exchange contracts that are considered effective as hedges has been included in OCI. Based on market valuations at June 30, 2025, $7.1 million of the amount of net deferred loss included in OCI at June 30, 2025 is expected to be reclassified as income into the unaudited condensed consolidated statements of operations over the next twelve months, as the transactions occur.

Interest Rate Derivatives: The following table summarizes the notional amounts, related rates, excluding spreads, and remaining terms of interest rate swap agreements at June 30, 2025 and December 31, 2024:


Notional Amount				Average Fixed Rate
JUNE 30,		DECEMBER 31		JUNE 30,		DECEMBER 31
2025		2024		2025		2024		Term at June 30, 2025
$	180.0	$	180.0	1.65	%	1.65	%	Extending to May 2027
$	10.7	$	12.0	2.13	%	1.93	%	Extending to July 2029

The fair value of all interest rate swap agreements was a net asset of $6.1 million and $9.9 million at June 30, 2025 and December 31, 2024, respectively. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in OCI. Based on market valuations at June 30, 2025, $4.4 million of the amount included in OCI as net deferred gain is expected to be reclassified as income in the unaudited condensed consolidated statements of operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreements.

The following table summarizes the fair value of derivative instruments reflected on a gross basis by contract as recorded in the unaudited condensed consolidated balance sheets:


	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	JUNE 30, 2025		DECEMBER 31, 2024		Balance Sheet Location	JUNE 30, 2025		DECEMBER 31, 2024
Derivatives designated as hedging instruments
Cash Flow Hedges
Interest rate swap agreements
Current	Prepaid expenses and other	$	3.9	$	4.3	Prepaid expenses and other	$	—	$	—

Long-term	Other non-current assets	2.2		5.6		Other non-current assets	—		—


Foreign currency exchange contracts
Current	Prepaid expenses and other	16.0		1.4		Prepaid expenses and other	6.7		0.5
	Other current liabilities	0.1		3.4		Other current liabilities	1.8		17.1
Long-term	Other non-current assets	3.4		—		Other non-current assets	1.6		—
	Other long-term liabilities	0.1		0.8		Other long-term liabilities	0.2		5.6



Total derivatives designated as hedging instruments		$	25.7	$	15.5		$	10.3	$	23.2
Derivatives not designated as hedging instruments
Cash Flow Hedges





Foreign currency exchange contracts
Current	Prepaid expenses and other	5.5		0.8		Prepaid expenses and other	3.2		1.2
	Other current liabilities	—		2.3		Other current liabilities	0.5		2.8




Total derivatives not designated as hedging instruments		$	5.5	$	3.1		$	3.7	$	4.0
Total derivatives		$	31.2	$	18.6		$	14.0	$	27.2

The following table summarizes the offsetting of the fair value of derivative instruments on a gross basis by counterparty as recorded in the unaudited condensed consolidated balance sheets:


	Derivative Assets as of June 30, 2025								Derivative Liabilities as of June 30, 2025
	Gross Amounts of Recognized Assets		Gross Amounts Offset		Net Amounts Presented		Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset		Net Amounts Presented		Net Amount
Cash Flow Hedges
Interest rate swap agreements	$	6.1	$	—	$	6.1	$	6.1	$	—	$	—	$	—	$	—
Foreign currency exchange contracts	13.4		(2.3)		11.1		11.1		2.3		(2.3)		—		—
Total derivatives	$	19.5	$	(2.3)	$	17.2	$	17.2	$	2.3	$	(2.3)	$	—	$	—

	Derivative Assets as of December 31, 2024								Derivative Liabilities as of December 31, 2024
	Gross Amounts of Recognized Assets		Gross Amounts Offset		Net Amounts Presented		Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset		Net Amounts Presented		Net Amount
Cash Flow Hedges
Interest rate swap agreements	$	9.9	$	—	$	9.9	$	9.9	$	—	$	—	$	—	$	—
Foreign currency exchange contracts	0.5		(0.5)		—		—		19.0		(0.5)		18.5		18.5
Total derivatives	$	10.4	$	(0.5)	$	9.9	$	9.9	$	19.0	$	(0.5)	$	18.5	$	18.5

The following table summarizes the pre-tax impact of derivative instruments as recorded in the unaudited condensed consolidated statements of operations:


	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)								Location of Gain or (Loss) Reclassified from OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from OCI into Income (Effective Portion)
	THREE MONTHS ENDED				SIX MONTHS ENDED					THREE MONTHS ENDED				SIX MONTHS ENDED
	JUNE 30,									JUNE 30,
Derivatives Designated as Hedging Instruments	2025		2024		2025		2024			2025		2024		2025		2024
Cash Flow Hedges
Interest rate swap agreements	$	(0.3)	$	1.1	$	(1.3)	$	4.5	Interest expense	$	1.4	$	1.7	$	2.7	$	3.6
Foreign currency exchange contracts	12.7		(12.4)		24.2		(31.0)		Cost of sales	(1.1)		(9.7)		(6.6)		(18.9)
Total	$	12.4	$	(11.3)	$	22.9	$	(26.5)		$	0.3	$	(8.0)	$	(3.9)	$	(15.3)




Derivatives Not Designated as Hedging Instruments									Location of Gain or (Loss) Recognized in Income on Derivative	2025		2024		2025		2024
Cash Flow Hedges

Foreign currency exchange contracts									Cost of sales	$	5.8	$	(2.0)	$	6.9	$	(5.3)
Total										$	5.8	$	(2.0)	$	6.9	$	(5.3)

HYSTER-YALE, INC. 10-Q