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Financial Instruments | 9 Months Ended
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Sep. 25, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Financial Instruments Derivative Instruments and Hedging Activities The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, and interest rates. The Company uses derivative instruments such as commodity futures contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures. All derivatives are recognized in the Condensed Consolidated Balance Sheets at their fair value. On the date the derivative contract is entered into, it is either a) designated as a hedge of a forecasted transaction or the variability of cash flow to be paid (cash flow hedge) or b) not designated in a hedge accounting relationship, even though the derivative contract was executed to mitigate an economic exposure (economic hedge), as the Company does not enter into derivative contracts for trading purposes. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge are recorded in stockholders’ equity within AOCI, to the extent effective, until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of undesignated derivatives executed as economic hedges are reported in current earnings. The Company documents all relationships between derivative instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value hedges to specific assets and liabilities in the Condensed Consolidated Balance Sheets and linking cash flow hedges to specific forecasted transactions or variability of cash flow. The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. When a derivative instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable of occurring, hedge accounting is discontinued prospectively in accordance with the derecognition criteria for hedge accounting. Commodity Futures Contracts Copper and brass represent the largest component of the Company’s variable costs of production. The cost of these materials is subject to global market fluctuations caused by factors beyond the Company’s control. The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts. These futures contracts have been designated as cash flow hedges. At September 25, 2021, the Company held open futures contracts to purchase approximately $46.9 million of copper over the next 18 months related to fixed price sales orders. The fair value of those futures contracts was a $112 thousand net gain position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At September 25, 2021, this amount was approximately $142 thousand of deferred net gains, net of tax. The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At September 25, 2021, the Company held open futures contracts to sell approximately $867 thousand of copper over the next 10 months related to copper inventory. The fair value of those futures contracts was a $16 thousand net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy). The Company presents its derivative assets and liabilities in the Condensed Consolidated Balance Sheets on a net basis by counterparty. The following table summarizes the location and fair value of the derivative instruments and disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:
|  | Asset Derivatives |  | Liability Derivatives
|  |  |  | Fair Value |  |  |  | Fair Value
(In thousands) |  | Balance Sheet Location |  | September 25, 2021 |  | December 26, 2020 |  | Balance Sheet Location |  | September 25, 2021 |  | December 26, 2020
Commodity contracts - gains |  | Other current assets |  | $ | 671 |  |  | $ | 1,213 |  |  | Other current liabilities |  | $ | 27 |  |  | $ | 68 |
Commodity contracts - losses |  | Other current assets |  | (559) |  |  | (8) |  |  | Other current liabilities |  | (43) |  |  | (5,863) |
Total derivatives (1) |  |  |  | $ | 112 |  |  | $ | 1,205 |  |  |  |  | $ | (16) |  |  | $ | (5,795) |
(1) Does not include the impact of cash collateral provided to counterparties. The following tables summarize the effects of derivative instruments on the Company’s Condensed Consolidated Statements of Income:
|  |  |  | For the Quarter Ended |  | For the Nine Months Ended
(In thousands) |  | Location |  | September 25, 2021 |  | September 26, 2020 |  | September 25, 2021 |  | September 26, 2020
Undesignated derivatives: |  |  |  |  |  |  |  |  |  |
Gain (loss) on commodity contracts (nonqualifying) |  | Cost of goods sold |  | 7,282 |  |  | 843 |  |  | (3,141) |  |  | (3,596) |
The following tables summarize amounts recognized in and reclassified from AOCI during the period:
|  | For the Quarter Ended September 25, 2021
(In thousands) |  | Gain Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges: |  |  |  |  |  |
Commodity contracts |  | $ | 845 |  |  | Cost of goods sold |  | $ | 1,265 |
Other |  | 13 |  |  | Other |  | (1) |
Total |  | $ | 858 |  |  | Total |  | $ | 1,264 |
Amounts recognized in and reclassified from AOCI (continued):
|  | For the Quarter Ended September 26, 2020
(In thousands) |  | Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges: |  |  |  |  |  |
Commodity contracts |  | $ | 337 |  |  | Cost of goods sold |  | $ | (180) |
Other |  | (6) |  |  | Other |  | — |
Total |  | $ | 331 |  |  | Total |  | $ | (180) |
|  | For the Nine Months Ended September 25, 2021
(In thousands) |  | Gain Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges: |  |  |  |  |  |
Commodity contracts |  | $ | 861 |  |  | Cost of goods sold |  | $ | (1,584) |
Other |  | 1 |  |  | Other |  | — |
Total |  | $ | 862 |  |  | Total |  | $ | (1,584) |
|  | For the Nine Months Ended September 26, 2020
(In thousands) |  | (Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Loss Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges: |  |  |  |  |  |
Commodity contracts |  | $ | (5,084) |  |  | Cost of goods sold |  | $ | 5,273 |
Other |  | 2 |  |  | Other |  | 1 |
Total |  | $ | (5,082) |  |  | Total |  | $ | 5,274 |
The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral. At September 25, 2021 and December 26, 2020, the Company had recorded restricted cash in other current assets of $2.9 million and $7.6 million, respectively, as collateral related to open derivative contracts under the master netting arrangements. Long-Term Debt The fair value of long-term debt at September 25, 2021 approximates the carrying value on that date. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of long-term debt is classified as level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly. On March 31, 2021, the Company entered into a Credit Agreement to replace its prior credit agreement that would have matured on December 6, 2021. The Company's total borrowing capacity under the Credit Agreement is $500.0 million. The Credit Agreement provides for an unsecured $400.0 million revolving credit facility, which matures March 31, 2026, and a term loan facility of $100.0 million, which matures March 31, 2022. Funds borrowed under the Credit Agreement may be used by the Company for working capital purposes and other general corporate purposes. In addition, the Credit Agreement provides a sublimit of $50.0 million for the issuance of letters of credit, a sublimit of $35.0 million for loans and letters of credit made in certain foreign currencies, and a Swing Line sublimit of $25.0 million. Outstanding letters of credit and foreign currency loans reduce borrowing availability under the Credit Agreement on a dollar-for-dollar basis. Total borrowings under the Credit Agreement were $120.0 million as of September 25, 2021. On October 6, 2021, the Company paid the term loan facility in full with borrowings under the revolving credit facility. During the first quarter of 2021, the Company announced the redemption of its Subordinated Debentures due 2027. The full redemption of outstanding debentures occurred on April 15, 2021 for a total of $291.4 million in principal plus accrued interest and a redemption premium of $5.7 million that was expensed during the second quarter.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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