Financial Instruments

9 Months Ended

Sep. 28, 2024

Notes To Financial Statements [Abstract]

Foreign Exchange: The company uses foreign currency forward, foreign exchange swaps and option purchase and sales contracts to hedge its exposure to changes in foreign currency exchange rates. The company’s primary hedging activities are to mitigate its exposure to changes in exchange rates on intercompany and third-party trade receivables and payables. The company does not currently enter into derivative financial instruments for speculative purposes. In managing its foreign currency exposures, the company identifies and aggregates naturally occurring offsetting positions and then hedges residual balance sheet exposures. The notional amount of foreign currency contracts outstanding was $265.7 million and $253.1 million as of September 28, 2024 and December 30, 2023, respectively. The fair value of the forward and option contracts was a gain of $0.1 million at the end of the third quarter of 2024.

Interest Rate: The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swapped one-month LIBOR for fixed rates. In February 2022, the company entered into an additional floating-to-fixed interest rate swap agreement that uses a daily SOFR in lieu of LIBOR. In April 2023, all outstanding LIBOR swap agreements were amended to one month term SOFR. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of September 28, 2024, the fair value of these instruments was an asset of $25.6 million. The change in fair value of these swap agreements in the first nine months of 2024 was a loss of $12.2 million, net of taxes.

The following table summarizes the company’s fair value of interest rate swaps (in thousands):


	Condensed Consolidated Balance Sheet Presentation	Sep 28, 2024		Dec 30, 2023
Fair value	Prepaid expense and other	$	2,808	$	2,897
Fair value	Other assets	$	22,821	$	39,882

The impact on earnings from interest rate swaps was as follows (in thousands):


		Three Months Ended				Nine Months Ended
	Presentation of Gain/(loss)	Sep 28, 2024		Sep 30, 2023		Sep 28, 2024		Sep 30, 2023
Gain/(loss) recognized in accumulated other comprehensive income	Other comprehensive income	$	(10,409)	$	8,706	$	4,159	$	21,141
Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)	Interest expense	$	6,884	$	8,679	$	21,309	$	23,963

Interest rate swaps are subject to default risk to the extent the counterparties are unable to satisfy their settlement obligations under the interest rate swap agreements. As a result, the company has counterparty credit exposure to large global financial institutions, which the company monitors on a regular basis.