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Fair Value of Assets and Liabilities | 3 Months Ended
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Mar. 29, 2025
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows: Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets; Level 2—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable; and Level 3—Valuations based upon one or more significant unobservable inputs. There were no transfers in or out of Level 1, Level 2 or Level 3 during the period. Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy. Cash Equivalents Cash equivalents primarily consist of money market funds, certificates of deposit, and short-term time deposits, which are held with institutions with sound credit ratings and are highly liquid. The Company classified cash equivalents as Level 1 and were valued at cost which approximates fair value. Investments in Equity Securities Investments in equity securities listed on a national market or exchange are valued at the last sales price and classified within Level 1 of the valuation hierarchy and recorded in Investments and Other long-term assets. Derivatives Designated as Hedging Instruments For derivatives that will be accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, the Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. For highly effective cash flow hedges, ASC 815 requires the entire change in fair value of the hedging instrument included in the assessment of hedge effectiveness to be recorded in other comprehensive income. No components of the Company's hedging instruments were excluded from the assessment of hedge effectiveness. Zero Cost Collar Agreement In July 2024, the Company implemented a hedging program to manage foreign currency risk exposure related to fluctuations between the U.S. dollar and Mexican peso. These foreign currency zero cost collars are designated as cash flow hedges for a portion of our Mexican peso-denominated manufacturing expenses, predominantly salary expenses, vendor payments, and utility expenses. If the spot rate is between the weighted-average ceiling and floor rates on the date of maturity, then the Company would not owe or receive any payments under these collars. The Company plans to continue executing zero cost collars with 14-month rolling maturities as an ongoing strategy to hedge peso-denominated manufacturing expenses. The trade entry date, maturity date, weighted-average floor, and weighted-average ceiling for each collar trade was as follows:
Trade Entry Date | Trade Maturity Date | Weighted-Average Floor | Weighted-Average Ceiling
July 3, 2024 | August 29, 2025 | 18.0000 | 19.4350
August 5, 2024 | September 29, 2025 | 19.6550 | 21.0000
September 3, 2024 | November 3, 2025 | 20.0820 | 21.7571
September 30, 2024 | November 26, 2025 | 19.8700 | 21.3650
November 4, 2024 | January 2, 2026 | 20.1200 | 21.6900
December 3, 2024 | February 2, 2026 | 20.4250 | 22.0377
January 2, 2025 | March 2, 2026 | 20.8000 | 21.9082
February 6, 2025 | March 30, 2026 | 20.5300 | 22.0000
The fair value of the collars was determined using an independent third-party valuation model. Pursuant to this model, changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive loss until the underlying transactions are recognized in earnings. For the three months ended March 29, 2025, the Company recorded a pre-tax unrealized gain on the collars of $2.4 million. As of March 29, 2025, the Company estimates that approximately $1.1 million of pre-tax losses recorded in accumulated other comprehensive loss will be recognized in earnings over the next 12 months. The amounts included in accumulated other comprehensive income will be reclassified to earnings should the hedge no longer be considered effective. No amount of ineffectiveness was included in net income for the three months ended March 29, 2025. The Company will continue to assess the effectiveness of the hedge on an ongoing basis. The primary inputs into the valuation of the collars are interest yield curves, interest rate volatilities, foreign exchange rates, foreign exchange volatilities, credit risk, credit spreads and other market information. The collars are classified within Level 2 of the fair value hierarchy since all significant inputs are corroborated by market observable data. Interest Rate Swap On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate. The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027. The fair value of the interest rate swap was valued using an independent third-party valuation model. Pursuant to this model, c hanges in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive loss u ntil the underlying transactions are recognized in earnings. For the three months ended March 29, 2025, the Company recorded a pre-tax unrealized loss on the interest rate swap of $2.3 million. As of March 29, 2025, the Company estimates that approximately $2.3 million of pre-tax gain recorded in accumulated other comprehensive loss will be recognized in earnings over the next 12 months. The primary inputs into the valuation of the interest rate swap are interest yield curves, interest rate volatility, credit risk, credit spreads and other market information. The interest rate swap is classified within Level 2 of the fair value hierarchy since all significant inputs are corroborated by market observable data. The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company seeks to minimize this risk by limiting its counterparties to major financial institutions with acceptable credit ratings and monitoring the total value of positions with individual counterparties. In the event of a default by one of its counterparties, the Company may not receive payments provided for under the terms of its derivatives. The Company does not enter into derivative financial instruments for trading purposes. As of March 29, 2025 and December 28, 2024, the fair values of the Company's derivative financial instruments and their classifications on the Condensed Consolidated Balance Sheets were as follows:
(in thousands) | Condensed Consolidated Balance Sheets Classification |  | March 29, 2025 |  | December 28, 2024 |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Interest rate swap agreement: |  |  |  |  |  |  |
Designated as cash flow hedge | Prepaid expenses and other current assets |  | $ | 2,131 |  |  | $ | 2,482 |  |  |
| Other long-term assets |  | 1,749 |  |  | 3,716 |  |  |
Zero cost collar agreement: |  |  |  |  |  |  |
Designated as cash flow hedge | Prepaid expenses and other current assets |  | $ | 173 |  |  | $ | 22 |  |  |
| Accrued liabilities |  | 1,848 |  |  | 4,067 |  |  |
| Other long-term liabilities |  | — |  |  | 2 |  |  |
The pre-tax (gains) losses recognized on derivative financial instruments in the Condensed Consolidated Statements of Net Income for the three months ended March 29, 2025 and March 30, 2024 were as follows:
|  |  |  | Three Months Ended |  |
(in thousands) |  | Classification of (Gains) Losses Recognized in the Condensed Consolidated Statements of Net Income |  | March 29, 2025 |  | March 30, 2024 |  |  |  |
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreement |  | Interest expense |  | $ | (788) |  |  | $ | (1,280) |  |  |  |  |
Zero cost collar agreement |  | Cost of sales |  | 1,480 |  |  | — |  |  |  |  |
Zero cost collar agreement |  | Selling, general, and administrative expenses |  | $ | 121 |  |  | — |  |  |  |  |
The pre-tax losses (gains) recognized on derivative financial instruments in the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 29, 2025 and March 30, 2024 were as follows:
|  | Three Months Ended |  |
(in thousands) |  | March 29, 2025 |  | March 30, 2024 |  |  |  |
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |
Interest rate swap agreement |  | $ | 2,318 |  |  | $ | (2,534) |  |  |  |  |
Zero cost collar agreement |  | $ | (2,442) |  |  | $ | — |  |  |  |  |
Mutual Funds The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. The Company maintains accounts for participants through which participants make investment elections. The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with readily determinable fair value and recorded in Other long-term assets in the Condensed Consolidated Balance Sheets. There we re no changes during the quarter ended March 29, 2025 to the Company’s valuation techniques used to measure asset and liability fair values o n a recurring basis. As of March 29, 2025 and December 28, 2024, the Company did not hold any non-financial assets or liabilities that are required to be measured at fair value on a recurring basis. The following table presents assets measured at fair value by classification within the fair value hierarchy as of March 29, 2025:
|  | Fair Value Measurements Using |  |
(in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash equivalents |  | $ | 542,185 |  |  | $ | — |  |  | $ | — |  |  | $ | 542,185 |
Investments in equity securities |  | 8,926 |  |  | — |  |  | — |  |  | 8,926 |
Mutual funds |  | 22,351 |  |  | — |  |  | — |  |  | 22,351 |
Total |  | $ | 573,462 |  |  | $ | — |  |  | $ | — |  |  | $ | 573,462 |
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 28, 2024:
|  | Fair Value Measurements Using |  |
(in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash equivalents |  | $ | 658,491 |  |  | $ | — |  |  | $ | — |  |  | $ | 658,491 |
Investments in equity securities |  | 10,182 |  |  | — |  |  | — |  |  | 10,182 |
Mutual funds |  | 23,268 |  |  | — |  |  | — |  |  | 23,268 |
Total |  | $ | 691,941 |  |  | $ | — |  |  | $ | — |  |  | $ | 691,941 |
In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the following methods and assumptions are used to estimate the fair value of other financial instruments that are not marked to market on a recurring basis. The Company’s other financial instruments include cash and cash equivalents, short-term investments, accounts receivable and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and accounts receivable approximate their fair values. The Company’s revolving and term loan debt facilities' fair values approximate book value at March 29, 2025 and December 28, 2024, as the rates on these borrowings are variable in nature. The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill. The Company utilizes Level 3 inputs in the determination of the initial fair value. The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series B and USD Senior Notes, Series A and Series B, as of March 29, 2025 and December 28, 2024 were as follows:
|  | March 29, 2025 |  | December 28, 2024
(in thousands) |  | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Euro Senior Notes, Series B due 2028 |  | $ | 102,557 |  |  | $ | 95,548 |  |  | $ | 98,928 |  |  | $ | 91,741 |
USD Senior Notes, Series A due 2025 |  | — |  |  | — |  |  | 50,000 |  |  | 49,919 |
USD Senior Notes, Series B due 2027 |  | 100,000 |  |  | 97,511 |  |  | 100,000 |  |  | 96,623 |
USD Senior Notes, Series B due 2030 |  | 125,000 |  |  | 116,960 |  |  | 125,000 |  |  | 114,786 |
USD Senior Notes, due 2032 |  | 100,000 |  |  | 92,877 |  |  | 100,000 |  |  | 91,175 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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