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Financial Instruments Measured at Fair Value | 3 Months Ended
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Apr. 01, 2023
Fair Value Disclosures [Abstract] |
Financial Instruments Measured At Fair Value [Text Block] | Financial Instruments Measured at Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. The following table presents assets measured at fair value on a recurring basis at April 1, 2023:
(thousands) |  | Balance Sheet Location |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents (a) |  | Cash and cash equivalents |  | $ | 7,951 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,951 |
Equity investments (b) |  | Other assets |  | 56,031 |  |  | — |  |  | — |  |  | 56,031 |
Interest rate swaps designated as cash flow hedges |  | Other assets |  | — |  |  | 50,225 |  |  | — |  |  | 50,225 |
Interest rate swap designated as fair value hedge |  | Other assets |  | — |  |  | 2,742 |  |  | — |  |  | 2,742 |
Foreign exchange contracts designated as net investment hedges |  | Other assets |  | — |  |  | 51,716 |  |  | — |  |  | 51,716 |
|  |  |  | $ | 63,982 |  |  | $ | 104,683 |  |  | $ | — |  |  | $ | 168,665 |
The following table presents assets measured at fair value on a recurring basis at December 31, 2022:
(thousands) |  | Balance Sheet Location |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents (a) |  | Cash and cash equivalents/ other assets |  | $ | 6,596 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,596 |
Equity investments (b) |  | Other assets |  | 50,614 |  |  | — |  |  | — |  |  | 50,614 |
Interest rate swaps designated as cash flow hedges |  | Other assets |  | — |  |  | 55,942 |  |  | — |  |  | 55,942 |
Foreign exchange contracts designated as net investment hedges |  | Other assets /other current assets |  | — |  |  | 60,962 |  |  | — |  |  | 60,962 |
|  |  |  | $ | 57,210 |  |  | $ | 116,904 |  |  | $ | — |  |  | $ | 174,114 |
(a) Cash equivalents include highly liquid investments with an original maturity of less than three months. (b) The company has an 8.4% equity ownership interest in Marubun Corporation and a portfolio of mutual funds with quoted market prices. The company recorded an unrealized gain (loss) of $8.5 million and $(5.7) million for the first quarter of 2023 and 2022, respectively, on equity securities held at the end of the quarter. Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (refer to Note C). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite-lived. Derivative Instruments The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings. Interest Rate Swaps The company manages the risk of variability in interest rates of future expected debt issuances by entering into various forward-starting interest rate swaps, designated as cash flow hedges. Changes in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders’ equity section in the company’s consolidated balance sheets in “Accumulated other comprehensive loss” and will be reclassified into income over the life of the anticipated debt issuance or in the period the hedged forecasted cash flows are deemed no longer probable to occur. Reclassified gains and losses are recorded within the line item “Interest and other financing expense, net” in the consolidated statements of operations. The fair value of interest rate swaps is estimated using a discounted cash flow analysis on the expected cash flows of each derivative based on observable inputs, including interest rate curves and credit spreads. At April 1, 2023 and December 31, 2022, the company had the following outstanding interest rate swaps designated as cash flow hedges:
Trade Date |  | Maturity Date |  | Notional Amount (thousands) |  | Weighted-Average Interest Rate |  | Date Range of Forecasted Transaction
April 2020 |  | December 2024 |  | $300,000 |  | 0.97% |  | Jan 2023 - Dec 2025
The company occasionally enters into interest rate swap transactions that convert certain fixed-rate debt to variable-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. During the first quarter of 2023, the company entered into an interest rate swap designated as a fair value hedge intended to hedge a portion of its interest rate exposure by converting the fixed rate on the company's $500.0 million 6.125% notes due in March 2026, to a floating interest rate based on the benchmark SOFR swap rate. For qualifying interest rate fair value hedges, gains or losses on derivatives are included in “Interest and other financing expense, net” in the consolidated statements of operations. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is also included in “Interest and other financing expense, net”. When a derivative is no longer designated as a hedge, any remaining difference between the carrying value and par value of the hedged item is amortized in “Interest and other financing expense, net” over the remaining life of the hedged item using the effective interest method. The counterparty to the interest rate swap has the option to cancel the swaps after one year, without penalty. As of April 1, 2023, the company had one outstanding interest rate swap designated as a fair value hedge, the terms of which are as follows:
Trade Date |  | Maturity Date |  | Notional Amount (thousands) |  | Interest Rate due from Counterparty |  | Interest Rate due to Counterparty
February 2023 |  | March 2026 |  | $500,000 |  | 6.125% |  | SOFR + 0.508%
Foreign Exchange Contracts The company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The company’s primary exposures to such transactions are denominated in the following currencies: Euro, Indian Rupee, and Chinese Renminbi. The company enters into foreign exchange forward, option, or swap contracts (collectively, the “foreign exchange contracts”) to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and mitigate the impact of changes in foreign currency exchange rates related to these transactions. Foreign exchange contracts generally have terms of no more than six months. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the foreign exchange contracts is estimated using foreign currency spot rates and forward rates quotes by third-party financial institutions. The notional amount of the foreign exchange contracts inclusive of foreign exchange contracts designated as a net investment hedge at April 1, 2023 and December 31, 2022 was $1.2 billion and $1.3 billion, respectively. Gains and losses related to non-designated foreign currency exchange contracts are recorded in "Cost of sales" in the company’s consolidated statements of operations. Gains and losses related to foreign currency exchange contracts designated as cash flow hedges are recorded in "Cost of sales," "Selling, general, and administrative expenses," and "Interest and other financing expense, net" based upon the nature of the underlying hedged transaction, in the company’s consolidated statements of operations. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued, and were not material to the financial statements for the periods presented. The following foreign exchange contracts were designated as net investment hedges:
|  | Notional Amount (thousands)
Maturity Date |  | April 1, 2023 |  | December 31, 2022
March 2023 |  | EUR | — |  |  | EUR | 50,000 |
September 2024 |  | EUR | 50,000 |  |  | EUR | 50,000 |
April 2025 |  | EUR | 100,000 |  |  | EUR | 100,000 |
January 2028 |  | EUR | 100,000 |  |  | EUR | 100,000 |
Total |  | EUR | 250,000 |  |  | EUR | 300,000 |
The contracts above have been designated as a net investment hedge which is in place to hedge a portion of the company’s net investment in subsidiaries with euro-denominated net assets. The change in the fair value of derivatives designated as net investment hedges are recorded in “foreign currency translation adjustment” (“CTA”) within “Accumulated other comprehensive loss” in the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness are included in “Interest and other financing expense, net” in the company’s consolidated statements of operations. During the first quarter of 2023, a foreign exchange contract designated as a net investment hedge matured and the company received $10.7 million, which is reported in the “cash flow from investing activities” section of the consolidated statements of cash flows. The effects of derivative instruments on the company’s consolidated statements of operations and other comprehensive income are as follows:
|  | Income Statement Line |  | Quarter Ended |  |
(thousands) |  |  | April 1, 2023 |  | April 2, 2022 |  |  |  |
Gain (Loss) Recognized in Income |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts, net investment hedge (a) |  | Interest Expense |  | $ | 2,048 |  |  | $ | 2,201 |  |  |  |  |
Interest rate swaps, cash flow hedge |  | Interest Expense |  | (839) |  |  | (868) |  |  |  |  |
Interest rate swap, fair value hedge (b) |  | Interest Expense |  | 2,742 |  |  | — |  |  |  |  |
Total |  |  |  | $ | 3,951 |  |  | $ | 1,333 |  |  |  |  |
Gain (Loss) Recognized in Other Comprehensive Income before reclassifications, net of tax |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts, net investment hedge (c) |  |  |  | $ | 1,125 |  |  | $ | 1,094 |  |  |  |  |
Interest rate swaps, cash flow hedge |  |  |  | (4,347) |  |  | 7,547 |  |  |  |  |
Total |  |  |  | $ | (3,222) |  |  | $ | 8,641 |  |  |  |  |
(a)Represents derivative amounts excluded from the assessment of effectiveness for the net investment hedges reclassified from CTA to “Interest and other financing expenses, net”. (b)The cumulative amount of fair value hedging adjustments to the carrying value of hedged debt instruments totaled a loss of $2.5 million for the first quarter of 2023. (c)Includes derivative losses of $1.7 million and $5.0 million for the first quarter of 2023 and 2022, respectively, which were excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income, net of tax. Other The carrying amount of “cash and cash equivalents”, “accounts receivable, net”, and “accounts payable” approximate their fair value due to the short maturities of these financial instruments.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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