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Financial Instruments and Fair Value Measurements | 9 Months Ended
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Oct. 01, 2021
Fair Value Disclosures [Abstract] |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative instruments and contingent consideration. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis. The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates, and uses derivatives to manage these exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. All derivatives are recorded at fair value on the Condensed Consolidated Balance Sheets. The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):
| Fair Value |  | Quoted Prices in Active Markets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
October 1, 2021 |  |  |  |  |  |  |
Assets: Foreign currency contracts | $ | 115 |  |  | $ | — |  |  | $ | 115 |  |  | $ | — |
Liabilities: Foreign currency contracts | 420 |  |  | — |  |  | 420 |  |  | — |
Liabilities: Interest rate swap | 4,403 |  |  | — |  |  | 4,403 |  |  | — |
Liabilities: Contingent consideration | 2,282 |  |  | — |  |  | — |  |  | 2,282 |
December 31, 2020 |  |  |  |  |  |  |
Assets: Foreign currency contracts | $ | 2,070 |  |  | $ | — |  |  | $ | 2,070 |  |  | $ | — |
Liabilities: Interest rate swap | 7,026 |  |  | — |  |  | 7,026 |  |  | — |
Liabilities: Contingent consideration | 3,900 |  |  | — |  |  | — |  |  | 3,900 |
(13.) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) Interest Rate Swaps The Company periodically enters into interest rate swap agreements in order to reduce the cash flow risk caused by interest rate changes on its outstanding floating rate borrowings. Under these swap agreements, the Company pays a fixed rate of interest and receives a floating rate equal to one-month LIBOR. The variable rate received from the swap agreements and the variable rate paid on the outstanding debt will have the same rate of interest, excluding the credit spread, and will reset and pay interest on the same date. The Company has designated these swap agreements as cash flow hedges based on concluding the hedged forecasted transaction is probable of occurring within the period the cash flow hedge is anticipated to affect earnings. Information regarding the Company’s outstanding interest rate swap designated as cash flow hedges as of October 1, 2021 is as follows (dollars in thousands):
Notional Amount |  |  |  | Start Date |  | End Date |  | Pay Fixed Rate |  | Receive Current Floating Rate |  | Fair Value |  | Balance Sheet Location
$ | 150,000 |  |  |  |  | Jun 2020 |  | Jun 2023 |  | 2.1785 | % |  | 0.0860 | % |  | $ | (4,403) |  |  | Other long-term liabilities
Information regarding the Company’s outstanding interest rate swap designated as cash flow hedges as of December 31, 2020 is as follows (dollars in thousands):
Notional Amount |  |  |  | Start Date |  | End Date |  | Pay Fixed Rate |  | Receive Current Floating Rate |  | Fair Value |  | Balance Sheet Location
$ | 200,000 |  |  |  |  | Jun 2020 |  | Jun 2023 |  | 2.1785 | % |  | 0.1480 | % |  | $ | (7,026) |  |  | Other long-term liabilities
Foreign Currency Contracts The Company periodically enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate fluctuations in its international operations. The Company has designated these foreign currency forward contracts as cash flow hedges. Information regarding outstanding foreign currency forward contracts designated as cash flow hedges as of October 1, 2021 is as follows (dollars in thousands):
Notional Amount |  | Start Date |  | End Date |  | $/Foreign Currency |  | Fair Value |  | Balance Sheet Location
$ | 665 |  |  | Oct 2021 |  | Nov 2021 |  | 0.0222 |  | UYU Peso |  | $ | 34 |  |  | Prepaid expenses and other current assets
1,015 |  |  | Oct 2021 |  | Dec 2021 |  | 0.0226 |  | UYU Peso |  | 32 |  |  | Prepaid expenses and other current assets
999 |  |  | Oct 2021 |  | Dec 2021 |  | 0.0222 |  | UYU Peso |  | 49 |  |  | Prepaid expenses and other current assets
2,155 |  |  | Oct 2021 |  | Dec 2021 |  | 0.0479 |  | MXN Peso |  | 31 |  |  | Accrued expenses and other current liabilities
3,669 |  |  | Oct 2021 |  | Dec 2021 |  | 1.2230 |  | Euro |  | (185) |  |  | Accrued expenses and other current liabilities
3,648 |  |  | Oct 2021 |  | Dec 2021 |  | 0.0486 |  | MXN Peso |  | (5) |  |  | Accrued expenses and other current liabilities
3,674 |  |  | Oct 2021 |  | Dec 2021 |  | 1.2245 |  | Euro |  | (190) |  |  | Accrued expenses and other current liabilities
4,444 |  |  | Oct 2021 |  | Dec 2021 |  | 0.0494 |  | MXN Peso |  | (71) |  |  | Accrued expenses and other current liabilities
(13.) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) Information regarding outstanding foreign currency forward contracts designated as cash flow hedges as of December 31, 2020 is as follows (dollars in thousands):
Notional Amount |  | Start Date |  | End Date |  | $/Foreign Currency |  | Fair Value |  | Balance Sheet Location
$ | 16,132 |  |  | Nov 2020 |  | Sep 2021 |  | 1.1949 |  | Euro |  | $ | 399 |  |  | Prepaid expenses and other current assets
10,224 |  |  | Jan 2021 |  | Sep 2021 |  | 0.0454 |  | MXN Peso |  | 922 |  |  | Prepaid expenses and other current assets
2,656 |  |  | Jan 2021 |  | Mar 2021 |  | 0.0443 |  | MXN Peso |  | 341 |  |  | Prepaid expenses and other current assets
7,269 |  |  | Apr 2021 |  | Dec 2021 |  | 0.0485 |  | MXN Peso |  | 77 |  |  | Prepaid expenses and other current assets
3,252 |  |  | Jan 2021 |  | Aug 2021 |  | 0.0232 |  | UYU Peso |  | 165 |  |  | Prepaid expenses and other current assets
3,966 |  |  | Jan 2021 |  | Nov 2021 |  | 0.0227 |  | UYU Peso |  | 166 |  |  | Prepaid expenses and other current assets
Derivative Instruments with Hedge Accounting Designation The following tables present the effect of cash flow hedge derivative instruments on other comprehensive income (loss) (“OCI”), AOCI and the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended October 1, 2021 and October 2, 2020 (in thousands):
|  | Three Months Ended
|  | October 1, 2021 |  | October 2, 2020
|  | Total |  | Amount of Gain (Loss) on Cash Flow Hedge Activity |  | Total |  | Amount of Gain (Loss) on Cash Flow Hedge Activity
Sales |  | $ | 305,574 |  |  | $ | (240) |  |  | $ | 235,942 |  |  | $ | 590 |
Cost of sales |  | 223,702 |  |  | 434 |  |  | 178,009 |  |  | (651) |
Operating expenses |  | 48,782 |  |  | 12 |  |  | 18,175 |  |  | (23) |
Interest expense |  | 10,053 |  |  | (584) |  |  | 9,368 |  |  | (1,066) |
|  | Nine Months Ended
|  | October 1, 2021 |  | October 2, 2020
|  | Total |  | Amount of Gain (Loss) on Cash Flow Hedge Activity |  | Total |  | Amount of Gain (Loss) on Cash Flow Hedge Activity
Sales |  | $ | 908,064 |  |  | $ | (203) |  |  | $ | 804,483 |  |  | $ | 549 |
Cost of sales |  | 652,960 |  |  | 1,508 |  |  | 591,985 |  |  | (1,059) |
Operating expenses |  | 148,056 |  |  | 50 |  |  | 119,479 |  |  | (57) |
Interest expense |  | 26,117 |  |  | (2,613) |  |  | 29,002 |  |  | (2,431) |
(13.) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
|  | Unrealized Gain (Loss) Recognized in OCI |  | Realized Gain (Loss) Reclassified from AOCI
|  | Three Months Ended |  | Location in Statements of Operations and Comprehensive Income |  | Three Months Ended
|  | October 1, 2021 |  | October 2, 2020 |  |  | October 1, 2021 |  | October 2, 2020
Interest rate swap |  | $ | 119 |  |  | $ | (11) |  |  | Interest expense |  | $ | (584) |  |  | $ | (1,066) |
Foreign exchange contracts |  | (239) |  |  | 68 |  |  | Sales |  | (240) |  |  | 590 |
Foreign exchange contracts |  | (235) |  |  | 451 |  |  | Cost of sales |  | 434 |  |  | (651) |
Foreign exchange contracts |  | 49 |  |  | 57 |  |  | Operating expenses |  | 12 |  |  | (23) |
|  | Nine Months Ended |  | Location in Statements of Operations and Comprehensive Income |  | Nine Months Ended
|  | October 1, 2021 |  | October 2, 2020 |  |  | October 1, 2021 |  | October 2, 2020
Interest rate swaps |  | $ | 10 |  |  | $ | (7,401) |  |  | Interest expense |  | $ | (2,613) |  |  | $ | (2,431) |
Foreign exchange contracts |  | (977) |  |  | 277 |  |  | Sales |  | (203) |  |  | 549 |
Foreign exchange contracts |  | (69) |  |  | (2,277) |  |  | Cost of sales |  | 1,508 |  |  | (1,059) |
Foreign exchange contracts |  | 26 |  |  | (15) |  |  | Operating expenses |  | 50 |  |  | (57) |
The Company expects to reclassify net losses totaling $3.4 million related to its cash flow hedges from AOCI into earnings during the next twelve months. Contingent Consideration The following table presents the changes in the estimated fair values of the Company’s liabilities for contingent consideration measured using significant unobservable inputs (Level 3) for the three and nine months ended October 1, 2021 and October 2, 2020 (in thousands):
| Three Months Ended |  | Nine Months Ended
| October 1, 2021 |  | October 2, 2020 |  | October 1, 2021 |  | October 2, 2020
Fair value measurement at beginning of period | $ | 2,281 |  |  | $ | 5,887 |  |  | $ | 3,900 |  |  | $ | 4,200 |
Amount recorded for acquisitions | — |  |  | — |  |  | — |  |  | 2,700 |
Fair value measurement adjustment | — |  |  | — |  |  | — |  |  | (500) |
Payments(1) | — |  |  | (500) |  |  | (1,621) |  |  | (1,000) |
Foreign currency translation | 1 |  |  | 14 |  |  | 3 |  |  | 1 |
Fair value measurement at end of period | $ | 2,282 |  |  | $ | 5,401 |  |  | $ | 2,282 |  |  | $ | 5,401 |
__________ (1)Amounts for 2021 periods consist of payments associated with the Company’s acquisitions of InoMec and USB, resulting from achievement of revenue-based goals for the period from March 1, 2020 to February 28, 2021 for InoMec and January 1, 2020 to December 31, 2020 for USB. Amounts for 2020 periods consist of a payment made to settle a portion of a contingent consideration arrangement relating to a license to use technology. On February 19, 2020, the Company acquired certain assets and liabilities of InoMec. See Note 2 “Business Acquisition” for additional information about the InoMec acquisition. On October 7, 2019, the Company acquired certain assets and liabilities of USB, a privately-held developer and manufacturer of complex braided biomedical structures for disposable and implantable medical devices. The contingent consideration at October 1, 2021 is the estimated fair value of the Company’s obligations, under the asset purchase agreements for InoMec and USB, to make additional payments if certain revenue goals are met. (13.) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) As of October 1, 2021, the current portion of contingent consideration liabilities is $1.0 million and included in Accrued expenses and other current liabilities, and the non-current portion is $1.3 million and included in Other long-term liabilities on the Condensed Consolidated Balance Sheets. As of December 31, 2020, the current portion of contingent consideration liabilities was $1.7 million and included in Accrued expenses and other current liabilities, and the non-current portion was $2.2 million and included in Other long-term liabilities on the Condensed Consolidated Balance Sheets. The following table provides quantitative information associated with the fair value measurement of the Company’s liabilities for contingent consideration:
|  | October 1, 2021 |  |  |  |  |  |
Contingency Type |  | Maximum Payout (undiscounted) |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Weighted Average or Range
Revenue-based payments |  | $ | 6,750 |  |  | $ | 2,282 |  |  | Monte Carlo |  | Revenue volatility |  | 35.0 | %
|  |  |  |  |  |  |  | Discount rate |  | 4.0 | %
|  |  |  |  |  |  |  | Projected year(s) of payment |  | 2022-2024
|  | December 31, 2020 |  |  |  |  |  |
Contingency Type |  | Maximum Payout (undiscounted) |  | Fair Value |  | Valuation Technique |  | Unobservable Inputs |  | Weighted Average or Range
Revenue-based payments |  | $ | 9,000 |  |  | $ | 3,900 |  |  | Monte Carlo |  | Revenue volatility |  | 35.0 | %
|  |  |  |  |  |  |  | Discount rate |  | 4.0 | %
|  |  |  |  |  |  |  | Projected year(s) of payment |  | 2021-2024
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis. The carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the short-term nature of these items. Borrowings under the Company’s Revolving Credit Facility, TLA Facility and TLB Facility accrue interest at a floating rate tied to a standard short-term borrowing index, selected at the Company’s option, plus an applicable margin. The carrying amount of this floating rate debt approximates fair value based upon the respective interest rates adjusting with market rate adjustments. Equity Investments The Company holds long-term, strategic investments in companies to promote business and strategic objectives. These investments are included in Other long-term assets on the Condensed Consolidated Balance Sheets. Non-marketable equity securities are equity securities without readily determinable fair value. The Company has elected the practicability exception to use an alternative approach that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. If an impairment is recognized on the Company’s non-marketable equity securities during the period, these assets are classified as Level 3 within the fair value hierarchy based on the nature of the fair value inputs. Equity investments comprise the following (in thousands):
|  |  |  |  | October 1, 2021 |  | December 31, 2020
Equity method investment |  |  |  |  | $ | 17,627 |  |  | $ | 21,470 |
Non-marketable equity securities |  |  |  |  | 5,723 |  |  | 5,723 |
Total equity investments |  |  |  |  | $ | 23,350 |  |  | $ | 27,193 |
(13.) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued) The components of (Gain) loss on equity investments for each period were as follows (in thousands):
| Three Months Ended |  | Nine Months Ended
| October 1, 2021 |  | October 2, 2020 |  | October 1, 2021 |  | October 2, 2020
Equity method investment (gain) loss | $ | (152) |  |  | $ | (2,234) |  |  | $ | 1,867 |  |  | $ | (3,954) |
The Company’s equity method investment is in a venture capital fund focused on investing in life sciences companies. As of October 1, 2021, the Company owned 6.6% of this fund.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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