Derivative Instruments & Hedging Activities
|6 Months Ended|
Jul. 03, 2021
|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:
The amount of gains and losses related to the Company’s derivative financial instruments for the six months ended July 3, 2021 and June 27, 2020, are presented as follows:
Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled $9,151 and $5,842 for the six months ended July 3, 2021 and June 27, 2020, respectively.
Interest Rate Swap Contracts
The Company has entered into interest rate swap transactions to hedge the variable interest rate payments on its credit facilities. In connection with these transactions, 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 swaps are designated as hedging instruments and are accounted for as cash flow hedges. The aggregate notional amount of the swaps was $195,000 as of July 3, 2021. The notional amount decreases periodically through the dates of expiration in April 2023 and October 2025. The contracts are 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 translational and transactional exposure associated with various business units whose local currency differs from the Company’s reporting currency. The Company’s forward contracts are not designated as hedging instruments for accounting purposes.
At July 3, 2021, the Company had nine forward foreign exchange contracts with an aggregate notional value of €52,112, maturing at various dates through December 2022.
Net Investment Hedge
The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. The Company has designated €90,000 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 $106,777 as of July 3, 2021 and is included in the Revolving line of credit line item in the Consolidated Balance Sheets. The gain on the net investment hedge recorded in accumulated other comprehensive income (“AOCI”) as part of the currency translation adjustment was $2,416, net of tax, for the six months ended July 3, 2021.
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.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef