Financial Instruments
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Dec. 30, 2013
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Financial Instruments |
Derivatives Interest Rate Swaps The Company’s business is exposed to interest rate risk resulting from fluctuations in interest rates on certain variable rate LIBOR debt. Increases in interest rates would increase interest expenses relating to the outstanding variable rate borrowings of certain foreign subsidiaries and increase the cost of debt. Fluctuations in interest rates can also lead to significant fluctuations in the fair value of the debt obligations. In 2011, the Company entered into a two-year pay-fixed, receive floating (1-month LIBOR), amortizing interest rate swap arrangement with an initial notional amount of $146,500, which expired on April 16, 2013. Under the terms of the interest rate swap, the Company would pay a fixed rate of 2.50% and would receive floating 1-month LIBOR during the swap period. The Company had designated this interest rate swap as a cash flow hedge and, during the years ended 2012 and 2011, the interest rate swap increased interest expense by $1,908 and $2,220, respectively. For the year ended 2013, the Company did not designate this interest rate swap as a cash flow hedge as the borrowings attributable to this interest rate swap were paid in full during the third quarter of 2012. The change in the fair value of this interest rate swap during the year ended December 30, 2013 was recorded as other, net in the consolidated statement of operations. Foreign Exchange Contracts 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 December 30, 2013 and December 31, 2012 was approximately $47,000 and $28,259, respectively. The Company has designated certain of these foreign exchange contracts as cash flow hedges.
The fair values of derivative instruments in the consolidated balance sheet are as follows:
The following tables provide 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 statement of operations when derivative amounts are reclassified out of accumulated other comprehensive income for the years ended 2013, 2012 and 2011:
The following provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive income for the years ended 2013, 2012 and 2011:
The Company expects that approximately $176 of the accumulated other comprehensive income 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 statement of operations on derivative instruments not designated as hedges is as follows for the years 2013, 2012 and 2011:
Other Financial Instruments The carrying amount and estimated fair value of the Company’s financial instruments as of December 30, 2013 and December 31, 2012 were as follows:
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 December 30, 2013 and December 31, 2012. 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 December 30, 2013 and December 31, 2012, the Company’s other financial instruments also included cash and cash equivalents, accounts receivable, notes receivable, accounts payable and equipment payables. Due to short-term maturities, the carrying amount of these instruments approximates fair value. |