Financial Instruments

6 Months Ended

Jul. 01, 2022

Investments, All Other Investments [Abstract]

Note 12: Financial Instruments

Foreign Currencies

As a multinational business, the Company engages in transactions that are denominated in a variety of currencies. When appropriate, the Company uses forward foreign currency contracts to reduce its overall exposure to the effects of currency fluctuations on its results of operations and cash flows. The Company’s policy prohibits trading in currencies for which there are no underlying exposures and entering into trades for any currency to intentionally increase the underlying exposure. The Company primarily hedges existing assets and liabilities associated with transactions currently on its balance sheet, which are undesignated hedges for accounting purposes. The Company is exposed to credit-related losses if counterparties to hedge contracts fail to perform their obligations. As of July 1, 2022, the counterparties to the Company’s hedge contracts were held at financial institutions that the Company believes to be highly-rated, and no credit-related losses are anticipated.

As of July 1, 2022 and December 31, 2021, the Company had net outstanding foreign exchange contracts with notional amounts of $271.1 million and $288.3 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within one to three months from the time of purchase. Management believes that these financial instruments should not subject the Company to increased risks from foreign exchange movements because gains and losses on these contracts should offset losses and gains on the underlying assets, liabilities and transactions to which they are related.

The following summarizes the Company’s net foreign exchange positions in U.S. Dollars (in millions):


	As of
	July 1, 2022				December 31, 2021
	Buy (Sell)		Notional Amount		Buy (Sell)		Notional Amount
Japanese Yen	60.1		60.1		33.2		33.2
Philippine Peso	57.6		57.6		67.1		67.1
Korean Won	42.5		42.5		44.1		44.1
Euro	22.2		22.2		65.9		65.9
Czech Koruna	16.4		16.4		15.0		15.0




Other Currencies - Buy	61.7		61.7		58.7		58.7
Other Currencies - Sell	(10.6)		10.6		(4.3)		4.3
	$	249.9	$	271.1	$	279.7	$	288.3

Amounts receivable or payable under the contracts are not material as of July 1, 2022 or December 31, 2021. During the quarters ended July 1, 2022 and July 2, 2021, realized and unrealized foreign currency transactions totaled a gain of $6.3 million and a loss of $1.6 million, respectively. During the six months ended July 1, 2022 and July 2, 2021, realized and unrealized foreign currency transactions totaled a gain of $8.2 million and $2.4 million, respectively. The realized and unrealized foreign currency transactions are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.

Cash Flow Hedges

All derivatives are recognized on the Company’s Consolidated Balance Sheets at their fair value and classified based on the applicable instrument's maturity date.

Foreign Currency Risk

The purpose of the foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies will be affected by changes in exchange rates. The Company enters into forward contracts that are designated as a foreign currency cash flow hedge of a forecasted payment denominated in a currency other than U.S. Dollars. For the quarters ended July 1, 2022 and July 2, 2021, the Company did not have outstanding derivatives for its foreign currency exposure designated as cash flow hedges.

Interest Rate Risk

The Company uses interest rate swap contracts to mitigate its exposure to interest rate fluctuations. The notional amounts of the interest rate swap agreements outstanding as of July 1, 2022 and July 2, 2021 amounted to $750.0 million and $1.5 billion, respectively. The fair value of the interest rate swaps totaled $29.0 million as of July 1, 2022, of which approximately $14.7 million was included in other current assets and approximately $14.3 million was included in other non-current assets. The Company did not identify any ineffectiveness with respect to the notional amounts of the interest rate swap contracts effective as of July 1, 2022 and July 2, 2021.

Other

As of July 1, 2022, the Company had no outstanding commodity derivatives, currency swaps, options, or equity investments held at subsidiaries or affiliated companies.