Note 7 - Derivative Financial Instruments

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7. Derivative Financial Instruments

Foreign Exchange Derivative Contracts

We operate and sell our products in various global markets and, as a result, we are exposed to changes in foreign currency exchange rates. We utilize foreign currency forward contracts to offset future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities. Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts to reduce the risks and volatility associated with foreign currency transaction gains or losses.

We do not use derivative financial instruments for speculative or trading purposes. For accounting purposes, our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts 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 income for both realized and unrealized gains and losses. The cash flows associated with the foreign currency forward contracts are reported in net cash provided by operating activities in our condensed consolidated statements of cash flows.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points. All our foreign exchange derivative contracts outstanding at September 30, 2023 will mature during the fourth quarter of fiscal 2023.

The following table provides information about our foreign currency forward contracts outstanding as of September 30, 2023 (in thousands):

		Contract Amount		Contract Amount
Currency	Contract Position	(Local Currency)		(U.S. Dollars)
Euro	Buy		58,637	$	62,000
Swiss Franc	Buy		11,874		13,000
Malaysian Ringgit	Buy		9,356		2,000
South Korean Won	Buy		2,699,700		2,000
Japanese Yen	Buy		148,930		1,000
				$	80,000

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 30, 2023 were immaterial.

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

		Three months ended						Nine months ended
Derivatives not designated	Location of loss	Sept. 30,			Sept. 24,			Sept. 30,			Sept. 24,
as hedging instruments	recognized on derivatives	2023			2022			2023			2022
Foreign exchange forward contracts	Foreign transaction loss	$	(6,885	)	$	(8,236	)	$	(5,672	)		(12,577	)