Quarterly report [Sections 13 or 15(d)]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

v3.25.2
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 6 Months Ended
Jun. 28, 2025
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 on a recurring basis to hedge certain foreign currency transactions. The notional amount of these outstanding foreign currency exchange contracts was $696.2 million at June 2025, $303.0 million at December 2024 and $340.1 million at June 2024, consisting primarily of contracts hedging exposures to the euro, Mexican peso, Norwegian krone, 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 on indebtedness. Because these swap agreements meet the criteria for hedge accounting, all related gains and losses are deferred within "accumulated other comprehensive loss" ("AOCL") in the Company's balance sheets and are amortized through the swap maturity dates.
During 2019, the Company entered into "floating to fixed" interest rate swap agreements that matured on April 18, 2024. On September 9, 2024, the Company entered into "floating to fixed" interest rate swap agreements that mature on August 18, 2029. In April 2025, the Company entered into "floating to fixed" interest rate swap agreements that mature on March 18, 2027, and April 18, 2027. The notional amount of these outstanding agreements was $150.0 million at December 2024, and $700.0 million at June 2025.
The Company's outstanding derivative financial instruments entered into on a recurring basis 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 June 2025.
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
June December June June December June
(In thousands) 2025 2024 2024 2025 2024 2024
Derivatives designated as hedging instruments:
Foreign currency exchange contracts $ 6,501  $ 7,720  $ 5,735  $ (14,386) $ (11,620) $ (4,757)
Interest rate swap agreements 2,106  5,390  —  —  —  — 
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts 17  —  15  (156) —  (29)
Total derivatives $ 8,624  $ 13,110  $ 5,750  $ (14,542) $ (11,620) $ (4,786)
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:
June 2025 December 2024 June 2024
(In thousands) Derivative Asset Derivative Liability Derivative Asset Derivative Liability Derivative Asset Derivative Liability
Gross amounts presented in the balance sheet $ 8,624  $ (14,542) $ 13,110  $ (11,620) $ 5,750  $ (4,786)
Gross amounts not offset in the balance sheet (3,523) 3,523  (3,468) 3,468  (2,983) 2,983 
Net amounts $ 5,101  $ (11,019) $ 9,642  $ (8,152) $ 2,767  $ (1,803)
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) June 2025 December 2024 June 2024
Prepaid expenses and other current assets $ 4,327  $ 5,845  $ 5,322 
Accrued and other current liabilities (10,120) (10,659) (2,950)
Other assets 4,297  7,265  428 
Other liabilities (4,422) (961) (1,836)
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 June Six Months Ended June
Cash Flow Hedging Relationships 2025 2024 2025 2024
Foreign currency exchange contracts $ (3,169) $ (11,334) $ (6,920) $ (1,188)
Interest rate swap agreements 361  (27) (2,103) 47 
Total $ (2,808) $ (11,361) $ (9,023) $ (1,141)
Gain (Loss) Reclassified from AOCL into Income
(In thousands) Three Months Ended June Six Months Ended June
Location of Gain (Loss) 2025 2024 2025 2024
Net revenues $ (177) $ (1,215) $ (988) $ (1,162)
Cost of goods sold (1,110) 6,290  (1,599) 11,581 
Other income (expense), net 56  85  232  167 
Interest expense 762  569  1,181  3,300 
Total $ (469) $ 5,729  $ (1,174) $ 13,886 
Derivative Contracts Not Designated as Hedges
Any derivative contracts that are not designated as hedges are recorded at fair value in the Company's balance sheets, and changes in the fair values of these contracts are recognized directly in earnings. During the first and second quarter of 2025, the Company entered into foreign currency exchange contracts totaling $1.3 billion CAD to hedge the purchase price of the Acquisition, which were settled on May 30, 2025, for a gain of $24.1 million. Derivative contracts not designated as hedges include these purchase price hedge contracts, along with a limited number of cash flow hedges that were deemed ineffective and de-designated during the six months ended June 2025 and June 2024. Refer to Note 2 to the Company's financial statements in this Form 10-Q for additional information related to the Acquisition.
The following table presents a summary of derivatives not designated as hedges included in the Company's statements of operations:
(In thousands) Location of Gain (Loss) on Derivatives Recognized in Income Gain (Loss) on Derivatives Recognized in Income
Derivatives Not Designated as Hedges Three Months Ended June Six Months Ended June
2025 2024 2025 2024
Foreign currency exchange contracts Cost of goods sold $ (71) $ 11  $ (71) $ 11 
Foreign currency exchange contracts Other income (expense), net 32,974  (19) 24,106  4 
Total $ 32,903  $ (8) $ 24,035  $ 15 
Other Derivative Information
There were no significant amounts recognized in earnings for the ineffective portion of any hedging relationships during the three and six months ended June 2025 and June 2024.
At June 2025, AOCL included $3.7 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.