Derivative Financial Instruments

6 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

As of December 31, 2022, the Company did not have any outstanding foreign currency forward contracts. For the three months ended December 31, 2022, the Company did not enter into or settle any foreign currency forward contracts. During the same period of the previous year, the Company did not enter into any foreign currency forward contracts and settled $5.1 million of contracts.

For the six months ended December 31, 2022, the Company did not enter into or settle any foreign currency contracts. During the same period of the previous year, the Company entered into $13.9 million foreign currency contracts and settled $10.6 million of such contracts.

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. On the date of termination this interest rate swap was in a liability position of $148,400, which has been 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. On the 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 tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended December 31, 2022 and January 1, 2022, respectively (in thousands):


Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of October 1, 2022		Effective Portion Recorded In AOCI		Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of December 31, 2022
Forward contracts	Cost of sales	$	—	$	—	$	—	$	—
Interest rate swap	Interest expense	(272)		—		59		(213)
Total		$	(272)	$	—	$	59	$	(213)

Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of October 2, 2021		Effective Portion Recorded In AOCI		Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of January 1, 2022
Forward contracts	Cost of sales	$	1,115	$	338	$	(1,498)	$	(45)
Interest rate swap	Interest expense	(574)		—		76		(498)
Total		$	541	$	338	$	(1,422)	$	(543)

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the six months ended December 31, 2022 and January 1, 2022, respectively (in thousands):


Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of July 2, 2022		Effective Portion Recorded In AOCI		Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of December 31, 2022
Forward contracts	Cost of sales	$	(79)	$	—	$	79	$	—
Interest rate swap	Interest expense	(346)		—		133		(213)
Total		$	(425)	$	—	$	212	$	(213)

Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of July 3, 2021		Effective Portion Recorded In AOCI		Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of January 1, 2022
Forward contracts	Cost of sales	$	2,721	$	562	$	(3,328)	$	(45)
Interest rate swap	Interest expense	(649)		—		151		(498)
Total		$	2,072	$	562	$	(3,177)	$	(543)

As of December 31, 2022, 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.