Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments & Hedging Activities

v3.21.2
Derivative Instruments & Hedging Activities
9 Months Ended
Oct. 02, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS & HEDGING ACTIVITIES

8. 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

 

October 2, 2021

 

January 2, 2021

 

 

Location

 

October 2, 2021

 

January 2, 2021

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

Interest rate swap contracts

Other assets

 

$

586

 

$

 

 

Other non-current liabilities

 

$

4,546

 

$

7,679

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

Forward foreign exchange contracts

Other current assets

 

 

513

 

 

169

 

 

Other current liabilities

 

 

56

 

 

1,413

 

Forward foreign exchange contracts

Other assets

 

 

172

 

 

42

 

 

Other non-current liabilities

 

 

 

 

138

 

Total derivatives

 

 

$

1,271

 

$

211

 

 

 

 

$

4,602

 

$

9,230

 

(1) See Note 4 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 nine months ended October 2, 2021 and September 26, 2020, 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)

 

 

 

October 2, 2021

 

September 26, 2020

 

 

into Earnings (Effective Portion)

 

October 2, 2021

 

September 26, 2020

 

Derivatives in cash flow hedging relationships:

 

 

 

 

 

 

 

 

Interest rate swap contracts

 

$

3,718

 

$

(2,807

)

 

Interest expense, net

 

$

(3,137

)

$

(2,630

)

Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled $12,965 and $8,572 for the nine months ended October 2, 2021 and September 26, 2020, respectively.

 

 

 

Amount of Gain or (Loss) Recognized
in Earnings on Derivatives

 

 

Location of Gain or (Loss) Recognized

 

 

October 2, 2021

 

September 26, 2020

 

 

in Earnings on Derivatives

Derivatives not designated as hedging instruments:

 

 

 

Forward foreign exchange contracts

 

$

3,401

 

$

(2,513

)

 

Foreign currency transaction gain loss, net

 

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 $170,000 as of October 2, 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 October 2, 2021, the Company had eight forward foreign exchange contracts with an aggregate notional value of €52,333, maturing at various dates through March 2023.

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 $104,326 as of October 2, 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 $4,303, net of tax, for the nine months ended October 2, 2021.