Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments & Hedging Activities

v3.20.1
Derivative Instruments & Hedging Activities
3 Months Ended
Mar. 28, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS & HEDGING ACTIVITIES

 

7.  DERIVATIVE INSTRUMENTS & HEDGING ACTIVITIES

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and hedging activities. 

The fair value of the Company’s derivative financial instruments included in the Consolidated Balance Sheets is presented as follows:

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance Sheet

 

Fair Value (1)

 

Fair Value (1)

 

 

Balance Sheet

 

Fair Value (1)

 

Fair Value (1)

 

 

Location

 

March 28, 2020

 

December 28, 2019

 

 

Location

 

March 28, 2020

 

December 28, 2019

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract

Other assets

 

$

 

$

 

 

Other non-current liabilities

 

$

9,821

 

$

5,792

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

Forward foreign exchange contracts

Other current assets

 

 

547

 

 

509

 

 

Other current liabilities

 

 

1,228

 

 

213

 

Forward foreign exchange contracts

Other assets

 

 

163

 

 

306

 

 

Other non-current liabilities

 

 

81

 

 

6

 

Total derivatives

 

 

$

710

 

$

815

 

 

 

 

$

11,130

 

$

6,011

 

(1) See Note 3 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.

 

The amount of gains and losses related to the Company’s derivative financial instruments for the three months ended March 28, 2020 and March 30, 2019, are presented as follows:

 

 

Amount of Gain or (Loss) Recognized in

Other Comprehensive Income on Derivatives (Effective Portion)

 

 

Location of Gain or (Loss) Reclassified

from Accumulated Other Comprehensive Income

Amount of Gain or (Loss) Reclassified from Accumulated

Other Comprehensive Income into Earnings (Effective Portion)

 

 

 

March 28, 2020

 

March 30, 2019

 

 

into Earnings (Effective Portion)

 

March 28, 2020

 

March 30, 2019

 

Derivatives in cash flow hedging relationships:

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract

 

$

(4,029

)

$

(1,521

)

 

Interest expense, net

 

$

(525

)

$

(183

)

Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled $2,951 and $4,385 for the three months ended March 28, 2020 and March 30, 2019, respectively.

 

 

 

Amount of Gain or (Loss) Recognized

in Earnings on Derivatives

 

 

Location of Gain or (Loss) Recognized

 

 

March 28, 2020

 

March 30, 2019

 

 

in Earnings on Derivatives

Derivatives not designated as hedging instruments:

 

 

 

Forward foreign exchange contracts

 

$

440

 

$

(24

)

 

Foreign currency transaction gain loss, net

 

Interest Rate Swap Contract

The Company has entered into an interest rate swap transaction to hedge the variable interest rate payments on the credit facilities. In connection with this transaction, the Company pays interest based upon a fixed rate as agreed upon with the respective counterparties and receives variable rate interest payments based on the one-month LIBOR. The interest rate swap has an aggregate notional amount of $175,000, which decreases by $25,000 annually, has been designated as a hedging instrument and is accounted for as a cash flow hedge. The interest rate swap was effective on August 2, 2018 and is scheduled to expire on April 3, 2023. The contract will be settled with the respective counterparties on a net basis at each settlement date.

Forward Foreign Exchange Contracts

The Company has entered into forward contracts to economically hedge transactional exposure associated with commitments arising from transactions denominated in a currency other than the functional currency of the respective operating entity. The Company’s forward contracts are not designated as hedging instruments for accounting purposes.

At March 28, 2020, the Company had eleven forward foreign exchange contracts with an aggregate notional value of €61,843, maturing at various dates through October 1, 2021.

Net Investment Hedge

The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. The Company has designated €100,000 of borrowings on the revolving credit facility as a net investment hedge of a portion of the Company’s European operations. The carrying value of the euro denominated debt totaled $111,365 as of March 28, 2020 and is included in the Revolving line of credit line item in the Consolidated Balance Sheets. The gain or loss on the net investment hedge recorded in accumulated other comprehensive income (“AOCI”) as part of the currency translation adjustment was a gain of $265, net of tax, for the three months ended March 28, 2020. No amounts associated with the net investment hedge were reclassified from AOCI into income for the three months ended March 28, 2020.