XML 67 R18.htm IDEA: XBRL DOCUMENT v3.20.1
DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Mar. 28, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative Financial Instruments
As of March 28, 2020, the Company had outstanding foreign currency forward contracts with a total notional amount of $43.0 million. The maturity dates for these contracts extend through December 2021. For the three months ended March 28, 2020, the Company entered into $23.8 million of foreign currency forward contracts and settled $6.6 million of such contracts. During the same period of the previous year, the Company did not enter into any foreign currency forward contracts and settled $7.0 million of such contracts.
For the nine months ended March 28, 2020, the Company entered into $23.8 million of foreign currency forward contracts and settled $20.5 million of such contracts. During the same period of the previous year, the Company entered into foreign currency forward contracts of $6.3 million and settled $19.0 million of such contracts.
As of March 28, 2020, the aggregate notional amount of the Company’s outstanding foreign currency contracts along with their unrealized gains (losses) are expected to mature as summarized below (in thousands):
Quarter Ending
 
Notional Contracts in MXN
 
Notional Contracts in USD
 
Estimated Fair Value
June 27, 2020
 
$
138,213

 
$
6,257

 
$
(365
)
September 26, 2020
 
$
141,173

 
$
6,729

 
$
(790
)
December 26, 2020
 
$
132,773

 
$
6,241

 
$
(725
)
April 3, 2021
 
$
148,253

 
$
6,682

 
$
(598
)
July 3, 2021
 
$
144,725

 
$
6,446

 
$
(576
)
October 2, 2021
 
$
146,373

 
$
5,502

 
$
360

January 1, 2022
 
$
137,973

 
$
5,129

 
$
328


On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of September 30, 2022, related to the borrowings outstanding under the term loan. This interest rate swap pays the Company variable interest at the one month LIBOR rate, and the Company pays the counter party a fixed interest rate. The fixed interest rate for the contract is 1.70% that replaces the one month LIBOR rate component of our contractual interest to be paid to WFB as part of our term loan. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the term loan, the interest rate contract was determined to be effective, and thus qualified as a cash flow hedge.
On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of November 1, 2023, related to the borrowings outstanding under the line of credit. This interest rate swap pays the Company variable interest at the one month LIBOR rate, and the Company pays the counter party a fixed interest rate. The fixed interest rate for the contract is 1.67% that replaces the one month LIBOR rate component of our contractual interest to be paid to WFB as part of our line of credit. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the line of credit, the interest rate contract was determined to be effective, and thus qualified as a cash flow hedge.
The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of March 28, 2020 and June 29, 2019 (in thousands):
 
 
 
March 28, 2020
 
June 29, 2019
Derivatives Designated as Hedging Instruments
Balance Sheet Location
 
Fair Value
 
Fair Value
Foreign currency forward contracts & swaps
Other current assets
 
$
—

 
$
2,912

Foreign currency forward contracts & swaps
Other long-term assets
 
$
687

 
$
320

Foreign currency forward contracts & swaps
Other current liabilities
 
$
(2,478
)
 
$
—

Foreign currency forward contracts & swaps
Other long-term liabilities
 
$
(576
)
 
$
—

Interest rate swap
Other current assets
 
$
3

 
$
2

Interest rate swap
Other current liabilities
 
$
(326
)
 
$
—

Interest rate swap
Other long-term liabilities
 
$
(541
)
 
$
—



The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended March 28, 2020 and March 30, 2019, respectively (in thousands):
Derivatives Designated as Hedging Instruments
Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
AOCI Balance
as of
December 28, 2019
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Income
 
AOCI Balance
as of
March 28, 2020
Forward contracts & swaps
Cost of sales
 
$
2,329

 
$
(3,163
)
 
$
(1,077
)
 
$
(1,911
)
Interest rate swap
Interest expense
 
(72
)
 
(591
)
 
(5
)
 
(668
)
Total
 
 
$
2,257

 
$
(3,754
)
 
$
(1,082
)
 
$
(2,579
)
 
 
 
 
 
 
 
 
 
 
Derivatives Designated as Hedging Instruments
Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
AOCI Balance
as of
December 29, 2018
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Income
 
AOCI Balance
as of
March 30, 2019
Forward contracts & swaps
Cost of sales
 
$
1,178

 
$
1,059

 
$
(194
)
 
$
2,043

Interest rate swap
Interest expense
 
13

 
1

 
(7
)
 
7

Total
 
 
$
1,191

 
$
1,060

 
$
(201
)
 
$
2,050



The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the nine months ended March 28, 2020 and March 30, 2019, respectively (in thousands):
Derivatives Designated as Hedging Instruments
Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
AOCI Balance
as of
June 29, 2019
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Income
 
AOCI Balance
as of
March 28, 2020
Forward contracts & swaps
Cost of sales
 
$
2,424

 
$
(1,671
)
 
$
(2,664
)
 
$
(1,911
)
Interest rate swap
Interest expense
 
2

 
(662
)
 
(8
)
 
(668
)
Total
 
 
$
2,426

 
$
(2,333
)
 
$
(2,672
)
 
$
(2,579
)
 
 
 
 
 
 
 
 
 
 
Derivatives Designated as Hedging Instruments
Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
AOCI Balance
as of
June 30, 2018
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Income
 
AOCI Balance
as of
March 30, 2019
Forward contracts & swaps
Cost of sales
 
$
(988
)
 
$
2,308

 
$
723

 
$
2,043

Interest rate swap
Interest expense
 
19

 
2

 
(14
)
 
7

Total
 
 
$
(969
)
 
$
2,310

 
$
709

 
$
2,050



As of March 28, 2020, the net amount of unrealized loss expected to be reclassified into earnings within the next 12 months is approximately $2.2 million. As of March 28, 2020, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.