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Note 7 - Derivative Financial Instruments
 9 Months Ended
Sep. 27, 2025
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. 27,

    

Sep. 28,

    

Sep. 27,

    

Sep. 28,

  

as hedging instruments

recognized on derivatives

  

2025

    

2024

    

2025

    

2024

  

Foreign exchange forward contracts

Foreign transaction gain (loss)

   $ (701 )   $ 2,461     $ 4,594       (2,864 )

 

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 AOCL were as follows (in thousands):

 

     

Three Months Ended

    

Nine Months Ended

  

Derivatives designated

Location of gain (loss)

  

Sep. 27,

    

Sep. 28,

    

Sep. 27,

    

Sep. 28,

  

as hedging instruments

recognized on derivatives

  

2025

    

2024

    

2025

    

2024

  

Foreign exchange forward contracts

AOCL

   $ 457     $ (3,603 )   $ (8,214 )   $ (3,603 )

 

Gains recognized in foreign transaction loss, in the condensed consolidated statements of operations for the portion of the net investment hedges excluded from the assessment of hedge effectiveness was $0.5 million and $1.2 million for the three- and nine-month periods ended September 27, 2025, and $0.4 million in both the three- and nine-month periods ended September 28, 2024, respectively.

 

Cash flows associated with settlements of our non-designated foreign currency forward contracts are reported in net cash used in operating activities and our net investment hedges are included in investing 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 27, 2025 will mature during the fourth quarter of fiscal 2025.

 

The following table provides information about our foreign currency forward contracts outstanding as of September 27, 2025 (in thousands):

 

     

Contract Amount

    

Contract Amount

  

Currency

Contract Position

  

(Local Currency)

    

(U.S. Dollars)

  

Euro

Buy

     39,316     $ 46,075  

Swiss Franc

Buy

     7,173       9,025  

South Korean Won

Buy

     2,818,800       2,000  

Japanese Yen

Buy

     320,544       2,150  

Euro

Sell

     51,613       61,100  

Swiss Franc

Sell

     9,030       11,500  

 

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 27, 2025 and December 28, 2024 were immaterial.