DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We maintain a foreign exchange risk management policy designed to establish a framework to protect the value of our non-functional currency denominated transactions from adverse changes in exchange rates. Sales of our products can be denominated in a currency different from the currency in which the related costs to produce the product are denominated. Changes in exchange rates on such inter-country sales or intercompany loans can impact our results of operations. Our policy is not to engage in speculative foreign currency hedging activities, but to minimize our net foreign currency transaction exposure, defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency. We may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks.

For derivative instruments designated as hedges, we formally document the nature and relationships between the hedging instruments and the hedged items, as well as the risk management objectives, strategies for undertaking the various hedge transactions, and the method of assessing hedge effectiveness at inception. Quarterly thereafter, we formally assess whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value or cash flows of the hedged item. Additionally, in order to designate any derivative instrument as a hedge of an anticipated transaction, the significant characteristics and expected terms of any anticipated transaction must be specifically identified, and it must be probable that the anticipated transaction will occur. All derivative financial instruments used as hedges are recorded at fair value in the Condensed Consolidated Balance Sheets (See Note 11 - Fair Value).

Cash Flow Hedge

For derivative instruments that are designated and qualify as cash flow hedges, the changes in fair values are recorded in accumulated other comprehensive loss and included in changes in derivative gain/loss. The changes in the fair values of derivatives designated as cash flow hedges are reclassified from accumulated other comprehensive loss to net income when the underlying hedged item is recognized in earnings. Cash flows from the settlement of derivative contracts designated as cash flow hedges offset cash flows from the underlying hedged items and are included in operating activities in the Condensed Consolidated Statements of Cash Flows.

Net Investment Hedge

A significant number of our operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of our foreign subsidiaries. A weakening U.S. dollar relative to foreign currencies has an additive translation effect on our financial statements. Conversely, a strengthening U.S. dollar has a dilutive effect. In some cases we maintain debt in these subsidiaries to offset the net asset exposure. In the event we plan on a full or partial liquidation of any of our foreign subsidiaries where our net investment is likely to be monetized, we will consider hedging the currency exposure associated with such a transaction.

On July 6, 2022, we entered into a seven-year USD/EUR fixed-to-fixed cross currency interest rate swap to effectively hedge the interest rate exposure relating to $203 million of the $400 million 3.60% Senior Notes due March 2032, which were issued by AptarGroup, Inc. on March 7, 2022. This USD/EUR swap agreement exchanged $203 million of fixed-rate 3.60% USD debt to €200 million of fixed-rate 2.5224% euro debt. We pay semi-annual fixed rate interest payments on the euro notional amount of €2.5 million and receive semi-annual fixed rate interest payments on the USD notional amount of $3.7 million. This swap has been designated as a net investment hedge to effectively hedge the foreign exchange risk associated with €200 million of our euro denominated net assets. We elected the spot method for recording the net investment hedge. Gains and losses resulting from the settlement of the excluded components are recorded in interest expense in the Condensed Consolidated Statements of Income. Gains and losses resulting from the fair value adjustments to the cross currency swap agreements are recorded in accumulated other comprehensive (loss) income as the swaps are effective in hedging the designated risk. As of June 30, 2025, the fair value of the cross currency swap was a $35.7 million liability. The swap agreement will mature on September 15, 2029.

Other

As of June 30, 2025, we have recorded the fair value of foreign currency forward exchange contracts of $0.9 million in prepaid and other and $0.9 million in accounts payable, accrued and other liabilities on the Condensed Consolidated Balance Sheets. All forward exchange contracts outstanding as of June 30, 2025 had an aggregate notional contract amount of $96.0 million.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024


		June 30, 2025				December 31, 2024
	Balance Sheet Location	Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments		Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	—	$	862	$	—	$	572

		$	—	$	862	$	—	$	572

Derivative Liabilities
Foreign Exchange Contracts	Accounts payable, accrued and other liabilities	$	—	$	884	$	—	$	622
Cross Currency Swap Contract (1)	Deferred and other non-current liabilities	35,699		—		11,851		—
		$	35,699	$	884	$	11,851	$	622

__________________________

(1)This cross currency swap agreement is composed of both an interest component and a foreign exchange component.

The Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income (Loss) for the Three Months Ended June 30, 2025 and 2024


Derivatives Designated as Hedging Instruments	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Location of (Loss) Gain Recognized in Income on Derivatives	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income on Derivative				Total Amount of Affected Income Statement Line Item
	2025		2024			2025		2024
Cross currency swap agreement:

Foreign exchange component	$	(14,138)	$	2,601	Miscellaneous, net	$	—	$	—	$	(120)
	$	(14,138)	$	2,601		$	—	$	—

The Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income (Loss) for the Six Months Ended June 30, 2025 and 2024


Derivatives Designated as Hedging Instruments	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income on Derivative				Total Amount of Affected Income Statement Line Item
	2025		2024			2025		2024
Cross currency swap agreement:

Foreign exchange component	$	(18,005)	$	5,509	Miscellaneous, net	$	—	$	—	$	(6)
	$	(18,005)	$	5,509		$	—	$	—

The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2025 and 2024


Derivatives Not Designated as Hedging Instruments	Location of (Loss) Gain Recognized in Income on Derivatives	Amount of (Loss) Gain Recognized in Income on Derivatives
		2025		2024
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	(496)	$	437
		$	(496)	$	437

The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income for the Six Months Ended June 30, 2025 and 2024


Derivatives Not Designated as Hedging Instruments	Location of Loss Recognized in Income on Derivatives	Amount of Loss Recognized in Income on Derivatives
		2025		2024
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	25	$	140
		$	25	$	140



			Gross Amounts Offset in the Statement of Financial Position	Net Amounts Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position
	Gross Amount					Financial Instruments	Cash Collateral Received	Net Amount

June 30, 2025
Derivative Assets	$	862	—	$	862	—	—	$	862
Total Assets	$	862	—	$	862	—	—	$	862

Derivative Liabilities	$	36,583	—	$	36,583	—	—	$	36,583
Total Liabilities	$	36,583	—	$	36,583	—	—	$	36,583

December 31, 2024
Derivative Assets	$	572	—	$	572	—	—	$	572
Total Assets	$	572	—	$	572	—	—	$	572

Derivative Liabilities	$	12,473	—	$	12,473	—	—	$	12,473
Total Liabilities	$	12,473	—	$	12,473	—	—	$	12,473

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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+ Details

APTARGROUP, INC. 10-Q