DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Jul. 03, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

As of July 3, 2021, the Company had outstanding foreign currency forward contracts with a total notional amount of $10.6 million. The maturity dates for these contracts and swaps extend through December 2021. As of July 3, 2021, the net amount of unrealized gain expected to be reclassified into earnings within the next 12 months is approximately $2.8 million. During the fiscal year ended July 3, 2021, the Company did not enter into any foreign currency forward contracts and settled $26.1 million of such contracts. During the fiscal year ended June 27, 2020, the Company entered into $23.8 million of foreign currency forward contracts and settled $26.7 million of such contracts. During the fiscal year ended June 29, 2019, the Company entered into $19.2 million of foreign currency forward contracts and settled $25.9 million of such contracts.

Subsequent to July 3, 2021, the Company entered into $13.9 million of additional foreign currency forward contracts that extended our hedge position through June 2022.

As of July 3, 2021, 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 and Swaps in MXN		Notional Contracts and Swaps in USD		Estimated Fair Value
October 2, 2021	$	146,373	$	5,502	$	1,874
January 1, 2022	$	137,973	$	5,129	$	1,740

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 with Wells Fargo Bank. This interest rate swap contract was terminated on August 14, 2020 when the Company entered into a loan and security agreement with Bank of America. At date of termination this interest rate swap was in a liability position of $148,400, which will be amortized to interest expense over the original term of the swap.

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 with Wells Fargo Bank. This interest rate swap contract was terminated on August 14, 2020 when the Company entered into a loan and security agreement with Bank of America. At date of termination this interest rate swap was in a liability position of $776,500, which will be amortized to interest expense over the original term of the swap.

The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheets as of July 3, 2021 and June 27, 2020 (in thousands):


		July 3, 2021		June 27, 2020
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Fair Value
Foreign currency forward contracts & swaps	Other current assets	$	3,614	$	—
Foreign currency forward contracts & swaps	Other long-term assets	$	—	$	1,097
Foreign currency forward contracts & swaps	Other current liabilities	$	—	$	(1,960)
Foreign currency forward contracts & swaps	Other long-term liabilities	$	—	$	(17)


Interest rate swaps	Other current liabilities	$	—	$	(347)
Interest rate swaps	Other long-term liabilities	$	—	$	(610)

The following table summarizes the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the fiscal year 2021 (in thousands):


Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of June 27, 2020		Effective Portion Recorded In AOCI		Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of July 3, 2021
Forward contracts	Cost of sales	$	(759)	$	4,621	$	(1,141)	$	2,721
Interest rate swap	Interest expense	(741)		(223)		315		(649)
Total		$	(1,500)	$	4,398	$	(826)	$	2,072

The following table summarizes the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the fiscal year 2020 (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 June 27, 2020
Forward contracts	Cost of sales	$	2,424	$	(865)	$	(2,318)	$	(759)
Interest rate swap	Interest expense	2		(782)		39		(741)
Total		$	2,426	$	(1,647)	$	(2,279)	$	(1,500)

The following table summarizes the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the fiscal year 2019 (in thousands):


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 June 29, 2019
Forward contracts & swaps	Cost of sales	$	(988)	$	3,332	$	80	$	2,424
Interest rate swap	Interest expense	19		2		(19)		2
Total		$	(969)	$	3,334	$	61	$	2,426

As of July 3, 2021, the Company does not have any foreign exchange contracts with credit-risk-related contingent features. The Company is subject to the risk of fluctuating interest rates from our line of credit and foreign currency risk resulting from our China operations. The Company does not currently manage these risk exposures by using derivative instruments.