Financial Instruments | 9 Months Ended |
Sep. 29, 2014 |
Financial Instruments | ' |
(8) Financial Instruments |
Derivatives |
The Company enters into foreign currency forward contracts to mitigate the impact of changes in foreign currency exchange rates and to reduce the volatility of purchases and other obligations generated in currencies other than the functional currencies. The Company’s foreign subsidiaries may at times purchase forward exchange contracts to manage their foreign currency risks in relation to certain purchases of machinery denominated in foreign currencies other than the Company’s foreign functional currency. The notional amount of the foreign exchange contracts as of September 29, 2014 and December 30, 2013 was approximately $30,379 and $47,000, respectively. The Company has designated certain of these foreign exchange contracts as cash flow hedges. |
The fair values of derivative instruments in the consolidated condensed balance sheet are as follows: |
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| | | | Asset / (Liability) Fair | | | | | | | | | | | | | | | | | | | |
Value | | | | | | | | | | | | | | | | | | |
| | Balance Sheet | | September 29, | | | December 30, | | | | | | | | | | | | | | | | | | | |
Location | 2014 | 2013 | | | | | | | | | | | | | | | | | | |
| | | | (In thousands) | | | | | | | | | | | | | | | | | | | |
Cash flow derivative instruments designated as hedges: | | | | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | Other accrued expenses | | $ | (62 | ) | | $ | (751 | ) | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | Deposits and other non-current assets | | | — | | | | 10 | | | | | | | | | | | | | | | | | | | |
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Cash flow derivative instruments not designated as hedges: | | | | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | Prepaid expenses and other current assets | | | — | | | | 647 | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | Other accrued expenses | | | (2,806 | ) | | | (899 | ) | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | Other long-term liabilities | | | — | | | | (1,288 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | (2,868 | ) | | $ | (2,281 | ) | | | | | | | | | | | | | | | | | | |
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The following table provides information about the amounts recorded in accumulated other comprehensive income related to derivatives designated as cash flow hedges, as well as the amounts recorded in each caption in the consolidated condensed statement of operations when derivative amounts are reclassified out of accumulated other comprehensive income: |
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| | | | | For the Quarter Ended | |
| | | | | September 29, 2014 | | | September 30, 2013 | |
| | | | | Effective Portion | | | Ineffective | | | Effective Portion | | | Ineffective | |
Portion | Portion |
| | Financial | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | |
Statement | Recognized in | Reclassified | Reclassified | Recognized in | Reclassified | Recognized |
Caption | Other | into | into | Other | into | into |
| Comprehensive | Income | Income | Comprehensive | Income | Income |
| Income | | | Income | | |
| | (In thousands) | |
Cash flow hedge: | | | | | | | | | | | | | | | | |
Foreign currency forward | | | Depreciation expense | | | $ | (65 | ) | | $ | (40 | ) | | $ | — | | | $ | (1,240 | ) | | $ | (111 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | (65 | ) | | $ | (40 | ) | | $ | — | | | $ | (1,240 | ) | | $ | (111 | ) | | $ | — | |
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| | | | | For the Three Quarters Ended | |
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| | | | | 29-Sep-14 | | | 30-Sep-13 | |
| | | | | Effective Portion | | | Ineffective | | | Effective Portion | | | Ineffective | |
Portion | Portion |
| | Financial | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | | | Gain/(Loss) | |
Statement | Recognized in | Reclassified | Reclassified | Recognized in | Reclassified | Recognized |
Caption | Other | into | into | Other | into | into |
| Comprehensive | Income | Income | Comprehensive | Income | Income |
| Income | | | Income | | |
| | (In thousands) | |
Cash flow hedge: | | | | | | | | | | | | | | | | |
Foreign currency forward | | | Depreciation expense | | | $ | 55 | | | $ | (105 | ) | | $ | — | | | $ | (1,437 | ) | | $ | (111 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | $ | 55 | | | $ | (105 | ) | | $ | — | | | $ | (1,437 | ) | | $ | (111 | ) | | $ | — | |
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The following table provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive income (loss) for the three quarters ended September 29, 2014 and September 30, 2013: |
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| | For the Three Quarters Ended | | | | | | | | | | | | | | | | | | | | | |
| | September 29, | | | September 30, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | | | | | | | | | |
Beginning balance unrealized loss, net of tax | | $ | (1,613 | ) | | $ | (15 | ) | | | | | | | | | | | | | | | | | | | | |
Changes in fair value, net of tax | | | 55 | | | | (1,437 | ) | | | | | | | | | | | | | | | | | | | | |
Reclassification to earnings | | | 105 | | | | 111 | | | | | | | | | | | | | | | | | | | | | |
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Ending balance unrealized loss, net of tax | | $ | (1,453 | ) | | $ | (1,341 | ) | | | | | | | | | | | | | | | | | | | | |
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The Company expects that approximately $169 of expense will be reclassified into the statement of operations, net of tax, in the next 12 months. |
The net gain (loss) recognized in other, net in the consolidated condensed statement of operations on derivative instruments not designated as hedges is as follows: |
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| | For the Quarter Ended | | | For the Three Quarters Ended | | | | | | | | | | | | | |
| | September 29, | | | September 30, | | | September 29, | | | September 30, | | | | | | | | | | | | | |
2014 | 2013 | 2014 | 2013 | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | |
Derivative instruments not designated as hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts | | $ | (2,213 | ) | | $ | 353 | | | $ | (1,259 | ) | | $ | (312 | ) | | | | | | | | | | | | |
Interest rate swap | | | — | | | | — | | | | — | | | | 620 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | (2,213 | ) | | $ | 353 | | | $ | (1,259 | ) | | $ | 308 | | | | | | | | | | | | | |
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Other Financial Instruments |
The carrying amount and estimated fair value of the Company’s financial instruments at September 29, 2014 and December 30, 2013 were as follows: |
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| | September 29, 2014 | | | December 30, 2013 | | | | | | | | | | | | | |
| | Carrying | | | Fair | | | Carrying | | | Fair | | | | | | | | | | | | | |
Amount | Value | Amount | Value | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | |
Available for sale securities | | $ | — | | | $ | — | | | $ | 148 | | | $ | 148 | | | | | | | | | | | | | |
Derivative assets, current | | | — | | | | — | | | | 647 | | | | 647 | | | | | | | | | | | | | |
Derivative liabilities, current | | | 2,868 | | | | 2,868 | | | | 1,650 | | | | 1,650 | | | | | | | | | | | | | |
Derivative assets, non-current | | | — | | | | — | | | | 10 | | | | 10 | | | | | | | | | | | | | |
Derivative liabilities, non-current | | | — | | | | — | | | | 1,288 | | | | 1,288 | | | | | | | | | | | | | |
Long-term debt | | | 273,805 | | | | 273,036 | | | | 370,008 | | | | 369,402 | | | | | | | | | | | | | |
Convertible senior notes due 2015 | | | 31,481 | | | | 32,800 | | | | 36,568 | | | | 39,960 | | | | | | | | | | | | | |
Convertible senior notes due 2020 | | | 195,234 | | | | 243,725 | | | | 167,167 | | | | 237,050 | | | | | | | | | | | | | |
The fair value of available for sale securities was determined using quoted market prices for the securities on an active exchange. |
The fair value of the derivative instruments was determined using pricing models developed based on the LIBOR swap rate, foreign currency exchange rates, and other observable market data, including quoted market prices, as appropriate. The values were adjusted to reflect nonperformance risk of the counterparty and the Company, as necessary. |
The fair value of the long-term debt was estimated based on discounting the debt over its life using current market rates for similar debt as of September 29, 2014 and December 30, 2013. |
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The fair value of the convertible senior notes was estimated based on quoted market prices of the securities on an active exchange, which are considered Level 1 inputs. |
As of September 29, 2014 and December 30, 2013, the Company’s other financial instruments also included cash and cash equivalents, accounts receivable, accounts payable and equipment payables. Due to short-term maturities, the carrying amount of these instruments approximates fair value. |