Derivative Instruments

We own and operate manufacturing operations in Mexico. As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. During the three month periods ended September 30, 2018 and October 1, 2017, we had contracts with Bank of Montreal that provided for monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. Our objective in entering into these currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges. As a result, all currency forward contracts are recognized in our accompanying condensed consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other (Expense) Income, net.

The following table quantifies the outstanding Mexican peso forward contracts as of September 30, 2018 (thousands of dollars, except average forward contractual exchange rates):

		Effective Dates		Notional Amount				Average Forward Contractual Exchange Rate				Fair Value
Buy MXP/Sell USD		October 15, 2018 - December 17, 2018		$	3,000				20.02			$	186

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets was as follows (thousands of dollars):

	September 30, 2018		July 1, 2018
Not Designated as Hedging Instruments:
Other Current Assets (Liabilities):
Mexican Peso Forward Contracts	$	186	$	(39	)

The pre-tax effects of the Mexican peso forward contracts are included in Other (Expense) Income, net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income and consisted of the following (thousands of dollars):

	Three Months Ended
	September 30, 2018		October 1, 2017
Not Designated as Hedging Instruments:
Realized Gain	$	172	$	458
Unrealized Gain (Loss)	$	225	$	(258	)