{"url_path":"/sec/dch/10-q/2026/item-3","section_key":"item-3","section_title":"Item 3 Quantitative and Qualitative Disclosures About Market Risk","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1062231/0001062231-26-000126-index.html","accession_number":"0001062231-26-000126","cik":"0001062231","ticker":"DCH","issuer_name":"Dauch Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/1062231/0001062231-26-000126-index.html","primary_entity_key":"0001062231","primary_entity_name":"Dauch Corp"},"word_count":773,"has_tables":true,"body_markdown":"Item 3.  Quantitative and Qualitative Disclosures About Market Risk\n\nMARKET RISK\n\nOur business and financial results are affected by fluctuations in global financial markets, including currency exchange rates and interest rates. Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.\n\nCurrency Exchange Risk  From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of March 31, 2026 and December 31, 2025, we had currency forward contracts outstanding with a total notional amount of $1,088.8 million and $216.2 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain working capital items into the third quarter of 2028. The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $99.0 million at March 31, 2026 and was $19.5 million at December 31, 2025.\n\nIn January 2025, in connection with the Business Combination, we entered into a foreign currency forward contract (the Business Combination Derivative) to reduce the variability in cash flows as a result of fluctuations in the foreign currency exchange rate between the U.S. dollar and pound sterling. This foreign currency forward contract was nondesignated and recognized at fair value each reporting period through the closing of the Business Combination with changes in fair value recognized in Other expense, net in our Condensed Consolidated Statement of Operations. At December 31, 2025, we had a notional amount outstanding under the Business Combination Derivative of £571.0 million, which was equivalent to approximately $769 million. Upon the closing of the Business Combination on February 3, 2026, the Business Combination Derivative was settled and we received net cash proceeds of approximately $65.9 million.\n\nIn the second quarter of 2024, we entered into a fixed-to-fixed cross-currency swap that is designated as a fair value hedge. This fixed-to-fixed cross-currency swap reduces the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At March 31, 2026 and December 31, 2025, we had a notional amount outstanding under the fixed-to-fixed cross-currency swap of €175.0 million, which was equivalent to $202.0 million and $205.5 million, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans through the second quarter of 2027. In the first quarter of 2026, we entered into additional fixed-to-fixed cross-currency swaps that are designated as fair value hedges. These fixed-to-fixed cross-currency swaps reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At March 31, 2026, we had a notional amount outstanding under the fixed-to-fixed cross-currency swaps of €200.0 million, which was equivalent to $230.9 million which hedges our exposure through the first quarter 2028, and €200.0 million, which was equivalent to $230.9 million which hedges our exposure through the first quarter of 2029. The potential decrease in fair value of our fixed-to-fixed cross-currency swaps, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately $66.4 million at March 31, 2026 and was $20.6 million at December 31, 2025.\n\nFuture business operations and opportunities, including the expansion of our business outside North America, may further increase the risk that cash flows resulting from these global operations may be adversely affected by changes in currency exchange rates. If and when appropriate, we intend to manage these risks by creating natural hedges in the structure of our global operations, utilizing local currency funding of these expansions and various types of foreign exchange contracts.\n\nInterest Rate Risk  We are exposed to variable interest rates on certain credit facilities. From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. As of March 31, 2026, we have $700.0 million notional amount hedged in relation to our variable-to-fixed interest rate swap into the second quarter of 2026, which subsequently increases to $1.0 billion through the fourth quarter of 2028, and decreases thereafter to $900.0 million through the fourth quarter of 2030 and to $500.0 million through the fourth quarter of 2031.\n\nThe pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately 14% of our weighted-average interest rate at March 31, 2026) on our long-term debt outstanding, would be approximately $12.5 million at March 31, 2026 and was approximately $4.4 million at December 31, 2025, on an annualized basis.\n\n45"}