Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 9 Months Ended
Sep. 28, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Summary of Derivative Financial Instruments
The Company enters into derivative contracts with external counterparties to hedge certain foreign currency transactions. The notional amount of all outstanding foreign currency exchange contracts was $317.0 million at September 2024, $348.8 million at December 2023 and $339.9 million at September 2023, consisting primarily of contracts hedging exposures to the euro, Mexican peso, Canadian dollar, British pound, Polish zloty and Swedish krona. Foreign currency exchange contracts have maturities up to 20 months.
The Company periodically enters into "floating to fixed" interest rate swap agreements to mitigate exposure to volatility in reference rates on the Company's future interest payments. Because these swap agreements meet the criteria for hedge accounting, all related gains and losses are deferred within accumulated other comprehensive loss ("AOCL") and are amortized through the swap maturity dates.
During 2019, the Company entered into "floating to fixed" interest rate swap agreements (the "2019 Swap Agreements") that matured on April 18, 2024. On September 9, 2024, the Company entered into new "floating to fixed" interest rate swap agreements (the "2024 Swap Agreements") that mature on August 18, 2029. The notional amount of the 2024 Swap Agreements was $150.0 million at September 2024. The notional amount of the 2019 Swap Agreements was $300.0 million at December 2023 and September 2023.
The Company's outstanding derivative financial instruments met the criteria for hedge accounting at the inception of the hedging relationship. At each reporting period, the Company assesses whether the hedging relationships continue to be highly effective in offsetting changes in cash flows of hedged items. If the Company determines that a specific hedging relationship has ceased to be highly effective, it discontinues hedge accounting. All designated hedging relationships were determined to be highly effective as of September 2024.
The following table presents the fair value of outstanding derivatives on an individual contract basis:
Fair Value of Derivatives
with Unrealized Gains		 Fair Value of Derivatives
with Unrealized Losses
September December September September December September
(In thousands) 2024 2023 2023 2024 2023 2023
Derivatives designated as hedging instruments:
Foreign currency exchange contracts $ 627  $ 16,490  $ 19,717  $ (12,987) $ (5,098) $ (1,737)
Interest rate swap agreements —  3,253  6,067  (203) —  — 
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts —  14  14  (37) (23) (37)
Total derivatives $ 627  $ 19,757  $ 25,798  $ (13,227) $ (5,121) $ (1,774)
The Company records and presents the fair value of all derivative assets and liabilities in the Company's balance sheets on a gross basis, even though certain derivative contracts are subject to master netting agreements. If the Company were to offset and record the asset and liability balances of its derivative contracts on a net basis in accordance with the terms of its master netting agreements, the amounts presented in the Company's balance sheets would be adjusted from the current gross presentation to the net amounts.
The following table presents a reconciliation of gross to net amounts for derivative asset and liability balances:
September 2024 December 2023 September 2023
(In thousands) Derivative Asset Derivative Liability Derivative Asset Derivative Liability Derivative Asset Derivative Liability
Gross amounts presented in the balance sheet $ 627  $ (13,227) $ 19,757  $ (5,121) $ 25,798  $ (1,774)
Gross amounts not offset in the balance sheet (627) 627  (894) 894  (1,774) 1,774 
Net amounts $ —  $ (12,600) $ 18,863  $ (4,227) $ 24,024  $ — 
The following table presents the location of derivatives in the Company's balance sheets, with current or noncurrent classification based on maturity dates:
(In thousands) September 2024 December 2023 September 2023
Prepaid expenses and other current assets $ 556  $ 18,319  $ 24,220 
Accrued and other current liabilities (10,686) (4,009) (1,442)
Other assets 71  1,438  1,578 
Other liabilities (2,541) (1,112) (332)
Cash Flow Hedges
The following tables present the pre-tax effects of cash flow hedges included in the Company's statements of operations and statements of comprehensive income:
Gain (Loss) on Derivatives Recognized in AOCL
(In thousands) Three Months Ended September Nine Months Ended September
Cash Flow Hedging Relationships 2024 2023 2024 2023
Foreign currency exchange contracts $ (12,592) $ 5,700  $ (13,780) $ 23,829 
Interest rate swap agreements (128) 202  (81) 1,910 
Total $ (12,720) $ 5,902  $ (13,861) $ 25,739 
Gain (Loss) Reclassified from AOCL into Income
(In thousands) Three Months Ended September Nine Months Ended September
Location of Gain (Loss) 2024 2023 2024 2023
Net revenues $ (402) $ (37) $ (1,564) $ (270)
Cost of goods sold 4,635  7,095  16,216  17,343 
Other expense, net 71  128  238  424 
Interest expense 75  2,664  3,375  7,200 
Total $ 4,379  $ 9,850  $ 18,265  $ 24,697 
Other Derivative Information
Any contracts that are not designated as hedges are recorded at fair value in the Company's balance sheets. Changes in the fair values of derivative contracts not designated as hedges are recognized directly in earnings. There were no significant amounts recognized in earnings for changes in the fair values of derivative contracts not designated as hedges or the ineffective portion of any hedging relationships during the three and nine months ended September 2024 and September 2023.
At September 2024, AOCL included $5.8 million of pre-tax net deferred losses for foreign currency exchange contracts and interest rate swap agreements that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on rates in effect when outstanding derivative contracts are settled.