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Financial Instruments and Risk Management | 6 Months Ended
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Jun. 29, 2019
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Financial Instruments and Risk Management | Financial Instruments and Risk Management The Company uses forward foreign exchange contracts to manage its exposures to movements in foreign exchange rates. As of June 29, 2019, the notional U.S. dollar equivalent of the Company’s derivative portfolio was $531,767, consisting of contracts hedging exposures primarily related to the Euro, Australian dollar, Canadian dollar and Mexican peso. Fair Values of Derivative Instruments The fair values of derivative financial instruments related to forward foreign exchange contracts recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:
| Balance Sheet Location |  | Fair Value
| June 29, 2019 |  | December 29, 2018
Hedges | Other current assets |  | $ | 5,733 |  |  | $ | 18,381 |
Non-hedges | Other current assets |  | 8,667 |  |  | 12,410 |
Total derivative assets |  |  | 14,400 |  |  | 30,791 |
Hedges | Accrued liabilities |  | (1,058 | ) |  | (286 | )
Non-hedges | Accrued liabilities |  | (988 | ) |  | (114 | )
Total derivative liabilities |  |  | (2,046 | ) |  | (400 | )
Net derivative asset |  |  | $ | 12,354 |  |  | $ | 30,391 |
Cash Flow Hedges 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 gain from AOCI of approximately$15,291. The Company is hedging exposure to the variability in future cash flows for forecasted transactions over the next 18 months. The effect of cash flow hedge derivative instruments on the Condensed Consolidated Statements of Income and AOCI is as follows:
| Amount of Gain Recognized in AOCI on Derivative Instruments |  | Amount of Gain Recognized in AOCI on Derivative Instruments
| Quarter Ended |  | Six Months Ended
| June 29, 2019 |  | June 30, 2018 |  | June 29, 2019 |  | June 30, 2018
Foreign exchange contracts | $ | 1,274 |  |  | $ | 26,982 |  |  | $ | 1,714 |  |  | $ | 25,274 |
| Location of Gain (Loss) Reclassified from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income
|  | Quarter Ended |  | Six Months Ended
|  | June 29, 2019 |  | June 30, 2018 |  | June 29, 2019 |  | June 30, 2018
Foreign exchange contracts (1) | Cost of sales |  | $ | 8,347 |  |  | $ | (5,554 | ) |  | $ | 14,364 |  |  | $ | (7,219 | )
(1) | The Company does not exclude amounts from effectiveness testing that would require recognition into earnings based on changes in fair value.
| Quarter Ended |  | Six Months Ended
| June 29, 2019 |  | June 30, 2018 |  | June 29, 2019 |  | June 30, 2018
Total cost of sales in which the effects of cash flow hedges are recorded | $ | 1,086,248 |  |  | $ | 1,055,487 |  |  | $ | 2,053,396 |  |  | $ | 1,948,070 |
Cross-Currency Swaps In July 2019, the Company entered into two cross-currency swaps with a total notional amount of €300,000 in order to hedge the currency fluctuation impact of the Company’s net investment in its European businesses. The swaps are contracts to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. These instruments will mature in 2024. The execution of the swaps had no impact on the financial statements for the quarter ended June 29, 2019. As part of the ongoing accounting for these derivative instruments, the Company will determine the fair value and record this amount as an asset or liability each reporting period. The Company has elected to utilize hedge accounting, which will result in the change in fair value of the derivatives to be recorded as an adjustment to equity. Mark to Market Hedges A derivative used as a hedging instrument whose change in fair value is recognized to act as a hedge against changes in the values of the hedged item is designated as a mark to market hedge. The Company uses foreign exchange derivative contracts as 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 |  | Amount of Gain (Loss) Recognized in Income
| Quarter Ended |  | Six Months Ended
| June 29, 2019 |  | June 30, 2018 |  | June 29, 2019 |  | June 30, 2018
Foreign exchange contracts | Cost of sales |  | $ | (9,361 | ) |  | $ | 10,011 |  |  | $ | (18,758 | ) |  | $ | 19,111 |
Foreign exchange contracts | Selling, general and administrative expenses |  | (262 | ) |  | 472 |  |  | (921 | ) |  | 775 |
Total |  |  | $ | (9,623 | ) |  | $ | 10,483 |  |  | $ | (19,679 | ) |  | $ | 19,886 |

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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 + Details
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- References No definition available. + Details
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