Financial Instruments

6 Months Ended

Jul. 03, 2020

Investments, All Other Investments [Abstract]

Note 12: Financial Instruments

Foreign Currencies

As a multinational business, the Company’s transactions are denominated in a variety of currencies. When appropriate, the Company uses forward foreign currency contracts to reduce its overall exposure to the effects of currency fluctuations on its results of operations and cash flows. The Company’s policy prohibits trading in currencies for which there are no underlying exposures and entering into trades for any currency to intentionally increase the underlying exposure. The Company primarily hedges existing assets and liabilities associated with transactions currently on its balance sheet, which are undesignated hedges for accounting purposes.

As of July 3, 2020 and December 31, 2019, the Company had net outstanding foreign exchange contracts with notional amounts of $172.5 million and $183.3 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within one to three months from the time of purchase. Management believes that these financial instruments should not subject the Company to increased risks from foreign exchange movements because gains and losses on these contracts should offset losses and gains on the underlying assets, liabilities and transactions to which they are related.

The following summarizes the Company’s net foreign exchange positions in U.S. Dollars (in millions):


	As of
	July 3, 2020						December 31, 2019
	Buy (Sell)		Notional Amount		Buy (Sell)		Notional Amount
Philippine Peso	$	52.9	$	52.9	$	36.4	$	36.4
Japanese Yen	38.1		38.1		49.8		49.8
Korean Won	22.7		22.7		18.1		18.1
Euro	19.6		19.6		—		—
Chinese Yuan	14.0		14.0		20.2		20.2
Malaysian Ringgit	6.4		6.4		20.4		20.4
Czech Koruna	—		—		11.9		11.9
Other Currencies - Buy	14.3		14.3		21.9		21.9
Other Currencies - Sell	(4.5)		4.5		(4.6)		4.6
	$	163.5	$	172.5	$	174.1	$	183.3

Amounts receivable or payable under the contracts are included in other current assets or accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets. During the quarters ended July 3, 2020 and June 28, 2019, realized and unrealized foreign currency transactions totaled a loss of $3.2 million and $1.0 million, respectively. During the six months ended July 3, 2020 and June 28, 2019, realized and unrealized foreign currency transactions totaled a loss of $3.4 million and $4.1 million, respectively. The realized and unrealized foreign currency transactions are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.

Cash Flow Hedges

All derivatives are recognized on the Company’s Consolidated Balance Sheets at their fair value and classified based on the instrument's maturity date.

Interest rate risk

On April 17, 2020, the Company entered into interest rate swap agreements for notional amounts totaling $1.25 billion (effective as of April 30, 2020), $750.0 million (effective as of December 31, 2020) and $750.0 million (effective as of December 31, 2021) with maturity dates of December 31, 2020, December 31, 2021 and December 31, 2022, respectively.

The Company uses interest rate swap contracts to mitigate its exposure to interest rate fluctuations. The Company did not identify any ineffectiveness with respect to the notional amounts of the interest rate swap contracts outstanding as of July 3, 2020 and June 28, 2019, amounting to $2.25 billion and $1.0 billion, respectively.

Foreign currency risk

The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies will be adversely affected by changes in exchange rates. The Company enters into forward contracts that are designated as foreign currency cash flow hedges of selected forecasted payments denominated in currencies other than U.S. Dollars.

For the quarters and six months ended July 3, 2020 and June 28, 2019, the Company did not have outstanding derivatives for its foreign currency exposure designated as cash flow hedges.

Convertible Note Hedges

The Company entered into convertible note hedges in connection with the issuance of the 1.00% Notes and 1.625% Notes.

Other

At July 3, 2020, the Company had no outstanding commodity derivatives, currency swaps or options relating to either its debt instruments or investments. The Company does not hedge the value of its equity investments in its subsidiaries or affiliated companies. The Company is exposed to credit-related losses if counterparties to hedge contracts fail to perform their obligations. As of July 3, 2020, the counterparties to the Company’s hedge contracts were held at financial institutions that the Company believes to be highly-rated, and no credit-related losses are anticipated.