DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

(8) DERIVATIVE FINANCIAL INSTRUMENTS

The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company’s Condensed Consolidated Statements of Operations, while others may be accounted for as fair value, cash flow, or net investment hedges. Derivative financial instruments have credit and market risk. The Company manages these risks of derivative instruments by monitoring limits as to the types and degree of risk that can be taken and by entering into transactions with counterparties who are recognized, stable multinational banks. Any gains or losses from net investment hedge activities remain in AOCI until either the sale or substantially complete liquidation of the related subsidiaries.

Fair value of derivative instruments as of September 30, 2023 and December 31, 2022 was as follows:

		September 30,		December 31,
Derivatives designated as hedging instruments:	Balance Sheet location	2023		2022
Commodity forward contracts	Prepaid expenses and other current assets	$	655	$	—
Commodity forward contracts	Other accrued expenses		(2,208)		(3,854)
Foreign currency forward contracts	Prepaid expenses and other current assets		—		83
Cross currency swap contracts	Prepaid expenses and other current assets		6,237		5,385
Cross currency swap contracts	Other accrued expenses		—		(210)
		$	4,684	$	1,404

Gains (losses) on derivatives recognized in the Condensed Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022 were as follows:

		Thirteen weeks ended				Thirty-nine weeks ended
Derivatives designated as	Statements of	September 30,		September 24,		September 30,		September 24,
hedging instruments:	Operations location	2023		2022		2023		2022
Commodity forward contracts	Product cost of sales	$	(997)	$	(1,545)	$	(6,060)	$	(1,047)
Foreign currency forward contracts	Other income (expenses)		—		(94)		177		(177)
Interest rate hedge amortization	Interest expense		(16)		(16)		(48)		(48)
Cross currency swap contracts	Interest expense		476		793		1,371		2,300
		$	(537)	$	(862)	$	(4,560)	$	1,028

Cash Flow Hedges

The Company enters into commodity forward contracts that qualify as cash flow hedges of the variability in cash flows attributable to future purchases. The gain (loss) realized upon settlement for each will be recorded in “Product cost of sales” in the Condensed Consolidated Statements of Operations in the period consumed. Notional amounts, purchase quantities, and maturity dates of these forward contracts as of September 30, 2023 were as follows:

	Notional		Total	Maturity
Commodity Type	Amount		Purchase Quantity	Dates
Steel hot rolled coil	$	20,906	25,000 short tons	October 2023 to April 2024
Natural gas		5,364	1,170,475 MMBtu	October 2023 to October 2025
Diesel fuel		658	1,512,000 gallons	October 2023 to June 2024

During the first quarter of fiscal 2023, a subsidiary with a Euro functional currency entered into a foreign currency forward contract to mitigate foreign currency risk related to a large customer order denominated in U.S. dollars. The forward contract, which qualified as a fair value hedge, had a notional amount to sell $1,800 in exchange for a stated amount of Euros and matured in April 2023.

Net Investment Hedges

In fiscal 2019, the Company entered into two fixed-for-fixed cross currency swaps (“CCS”), swapping U.S. dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due in 2044 for Danish krone (“DKK”) and Euro denominated payments. The CCS were entered into in order to mitigate foreign currency risk on the Company’s Euro and DKK investments and to reduce interest expense. Interest is exchanged twice per year on April 1 and October 1.

The Company designated the initial full notional amount of the two CCS ($130,000) as a hedge of the net investment in certain Danish and European subsidiaries under the spot method, with all changes in the fair value of the CCS that are included in the assessment of effectiveness (changes due to spot foreign exchange rates) recorded as cumulative foreign currency translation within AOCI. Net interest receipts will be recorded as a reduction of interest expense over the life of the CCS.

In the third and fourth quarters of fiscal 2022, the Company settled the DKK CCS and received proceeds of $3,532. Due to the sale of the offshore wind energy structures business in the fourth quarter of fiscal 2022, the Company reclassified the cumulative net investment hedge gain of $4,827 ($3,620 after-tax) from AOCI to “Other income (expenses)” in the Consolidated Statements of Earnings as of December 31, 2022 on Form 10-K.

Key terms of the Euro CCS are as follows:

	Notional			Swapped	Set Settlement
Currency	Amount		Termination Date	Interest Rate	Amount
Euro	$	80,000	April 1, 2024	2.825%	€	71,550