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Note 7 - Derivative Financial Instruments

9 Months Ended

Sep. 28, 2024

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7.	Derivative Financial Instruments

Economic (Non-Designated) Hedges

We enter into foreign currency forward contracts to manage our foreign exchange exposure related to intercompany transactions and other balance sheet items that are subject to revaluation. For accounting purposes, our foreign currency forward contracts that are not designated as hedging instruments are recorded at fair value as of the end of our reporting period in our condensed consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our condensed consolidated statements of operations for both realized and unrealized gains and losses. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

The location and amount of gains and losses related to non-designated derivative instruments in the condensed consolidated statements of operations were as follows (in thousands):

			Three Months Ended								Nine Months Ended
Derivatives not designated	Location of gain (loss)		Sep. 28,				Sep. 30,				Sep. 28,				Sep. 30,
as hedging instruments	recognized on derivatives		2024				2023				2024				2023
Foreign exchange forward contracts	Foreign transaction gain (loss)		$	2,461			$	(6,885	)		$	(2,864	)			(5,672	)

Net Investment Hedges

In the third quarter of fiscal 2024 we began hedging foreign currency risk associated with net investment positions in certain of our foreign subsidiaries. To accomplish this, we enter into foreign currency forward contracts that are designated as hedges of our net investment.

The location and amount of gains and losses from net investment hedges recorded in the foreign currency translation component of accumulated AOCI were as follows (in thousands):

			Three Months Ended								Nine Months Ended
Derivatives designated	Location of gain (loss)		Sep. 28,				Sep. 30,				Sep. 28,				Sep. 30,
as hedging instruments	recognized on derivatives		2024				2023				2024				2023
Foreign exchange forward contracts	AOCI		$	(3,603	)			N/A			$	(3,603	)			N/A

Gains recognized in foreign transaction gain (loss), in the condensed consolidated statements of operations for the portion of the net investment hedges excluded from the assessment of hedge effectiveness was $0.4 million for both the three and nine-month periods ended September 28, 2024.

Cash flows associated with the settlement of all our foreign currency forward contracts are reported in net cash provided by operating activities in our condensed consolidated statements of cash flows.

Fair Value

The fair value of our foreign currency forward contracts was determined based on current foreign currency exchange rates and forward points. All our foreign currency forward contracts outstanding on September 28, 2024 will mature during the fourth quarter of fiscal 2024.

The following table provides information about our foreign currency forward contracts outstanding as of September 28, 2024 (in thousands):

			Contract Amount				Contract Amount
Currency	Contract Position		(Local Currency)				(U.S. Dollars)
Euro	Buy			49,261			$	55,000
Swiss Franc	Buy			10,924				13,000
Malaysian Ringgit	Buy			6,584				1,600
South Korean Won	Buy			2,635,400				2,000
Japanese Yen	Buy			142,140				1,000
Euro	Sell			(56,164	)			(60,500	)
Swiss Franc	Sell			(14,334	)			(16,000	)

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs. The fair values of foreign currency contracts outstanding on September 28, 2024 and December 30, 2023 were immaterial.