Financial Instruments and Risk Management

The Company uses forward foreign exchange contracts to manage its exposures to movements in foreign exchange rates. As of March 31, 2018, the notional U.S. dollar equivalent of the Company’s derivative portfolio was $665,122, primarily consisting of contracts hedging exposures to the Euro, Australian dollar, Canadian dollar and Mexican peso.

Fair Values of Derivative Instruments

The fair values of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:



	Balance Sheet Location	Fair Value
	Balance Sheet Location	March 31, 2018			December 30, 2017
Hedges	Other current assets	$	1,990		$	1,464
Non-hedges	Other current assets	181			136
Total derivative assets		2,171			1,600

Hedges	Accrued liabilities	(11,421		)	(14,750		)
Non-hedges	Accrued liabilities	(6,611		)	(7,818		)
Total derivative liabilities		(18,032		)	(22,568		)

Net derivative liability		$	(15,861	)	$	(20,968	)

Cash Flow Hedges

A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability is designated as a cash flow hedge. The Company uses forward foreign exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated transactions, foreign currency-denominated investments and other known foreign currency exposures. Gains and losses on these contracts are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.

The Company expects to reclassify into earnings during the next 12 months a net loss from AOCI of approximately $18,534.

The ineffective portion of the changes in the fair value of derivatives used as cash flow hedges are reported in the “Cost of sales” line in the Condensed Consolidated Statements of Income.

The effect of cash flow hedge derivative instruments on the Condensed Consolidated Statements of Income and AOCI is as follows:



	Amount of Loss Recognized in AOCI (Effective Portion)
	Quarter Ended
	March 31, 2018			April 1, 2017
Foreign exchange contracts	$	(1,708	)	$	(18,114	)



	Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
		Quarter Ended
		March 31, 2018			April 1, 2017
Foreign exchange contracts	Cost of sales	$	(1,665	)	$	298

Mark to Market Hedges

A derivative used as a hedging instrument whose change in fair value is recognized to act as an economic hedge against changes in the values of the hedged item is designated a mark to market hedge. The Company uses foreign exchange derivative contracts as economic hedges against the impact of foreign exchange fluctuations on existing accounts receivable and payable balances and intercompany lending transactions denominated in foreign currencies. Foreign exchange derivative contracts are recorded as mark to market hedges when the hedged item is a recorded asset or liability that is revalued in each accounting period. These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheets. Any gains or losses resulting from changes in fair value are recognized directly into earnings. Gains or losses on these contracts largely offset the net remeasurement gains or losses on the related assets and liabilities.

The effect of derivative contracts not designated as hedges on the Condensed Consolidated Statements of Income is as follows:



	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income
		Quarter Ended
		March 31, 2018		April 1, 2017
Foreign exchange contracts	Cost of sales	$	9,100	$	—
Foreign exchange contracts	Selling, general and administrative expenses	303		(4,264		)
Total		$	9,403	$	(4,264	)