Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The Company’s earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, and interest rates.  The Company uses derivative instruments such as commodity futures contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures.

Commodity Futures Contracts

Copper and brass represent the largest component of the Company’s variable costs of production.  The cost of these materials is subject to global market fluctuations caused by factors beyond the Company’s control.  The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts.  These futures contracts have been designated as cash flow hedges.  

At December 30, 2023, the Company held open futures contracts to purchase approximately $5.8 million of copper over the next twelve months related to fixed price sales orders.  The fair value of those futures contracts was a $0.1 million net gain position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).  In the next 12 months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges.  At December 30, 2023, this amount was approximately $0.1 million of deferred net gains, net of tax.

The Company may also enter into futures contracts to protect the value of inventory against market fluctuations.  At December 30, 2023, the Company held open futures contracts to sell approximately $61.3 million of copper over the next twelve months related to copper inventory.  The fair value of those futures contracts was a $0.2 million net loss position, which was determined by obtaining quoted market prices (level 1 within the fair value hierarchy).  

The Company presents its derivative assets and liabilities in the Consolidated Balance Sheets on a net basis by counterparty.  The following table summarizes the location and fair value of the derivative instruments and disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
(In thousands)	Balance Sheet Location	2023		2022		Balance Sheet Location	2023		2022
Commodity contracts - gains	Other current assets	$	589	$	3,746	Other current liabilities	$	16	$	—
Commodity contracts - losses	Other current assets	(281)		(1,483)		Other current liabilities	(383)		—
Total derivatives (1)		$	308	$	2,263		$	(367)	$	—

(1) Does not include the impact of cash collateral provided to counterparties.

The following table summarizes the effects of derivative instruments on the Consolidated Statements of Income:

(In thousands)	Location	2023		2022
Undesignated derivatives:
(Loss) gain on commodity contracts (nonqualifying)	Cost of goods sold	$	(1,071)	$	20,659

The following tables summarize amounts recognized in and reclassified from AOCI during the period:

	For the Year Ended December 30, 2023
(In thousands)	Gain (Loss) Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Gain Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	1,180	Cost of goods sold	$	(2,419)
Other	(34)		Other	—
Total	$	1,146	Total	$	(2,419)

	For the Year Ended December 31, 2022
(In thousands)	(Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax		Classification Gains (Losses)	Loss Reclassified from AOCI (Effective Portion), Net of Tax
Cash flow hedges:
Commodity contracts	$	(7,066)	Cost of goods sold	$	7,666
Other	83		Other	—
Total	$	(6,983)	Total	$	7,666

The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts.  Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions.  The master netting agreements generally also provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a termination event.  The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral.  At December 30, 2023 and December 31, 2022, the Company had recorded restricted cash in other current assets of $3.2 million and $4.0 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.