Quantitative and Qualitative Disclosures About Market Risk
−Removed: In the normal course of business operations, we are exposed to risks associated with fluctuations in interest rates and foreign currency exchange rates.
+Added: In the normal course of business operations, we are exposed to risks associated with fluctuations in interest rates, foreign currency exchange rates, and commodity prices.
We address these risks through controlled risk management that includes the use of derivative financial instruments to economically hedge or reduce these exposures.
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We have not experienced any losses to date on any derivative financial instruments due to counterparty credit risk.
−Removed: To ensure the adequacy and effectiveness of our interest rate and foreign exchange hedge positions, we continually monitor our interest rate swap positions and foreign exchange forward positions, both on a stand-alone basis and in conjunction with their underlying interest rate and foreign currency exposures, from an accounting and economic perspective.
−Removed: However, given the inherent limitations of forecasting and the anticipatory nature of the exposures intended to be hedged, we cannot be assured that such programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in either interest or foreign exchange rates.
+Added: To ensure the adequacy and effectiveness of our interest rate, foreign exchange, and commodity price hedge positions, we continually monitor our interest rate swap positions, foreign exchange forward positions, and commodity hedge price positions, both on a stand-alone basis and in conjunction with their underlying interest rate, foreign currency, and commodity price exposures, from an accounting and economic perspective.
+Added: However, given the inherent limitations of forecasting and the anticipatory nature of the exposures intended to be hedged, we cannot be assured that such programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in either interest, foreign exchange rates, or commodity prices.
In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect our consolidated operating results and financial position.
Interest Rate Risks
−Removed: Our business is exposed to interest rate risk resulting from fluctuations in interest rates.
+Added: Our business is exposed to risk resulting from fluctuations in interest rates.
Our interest expense is more sensitive to fluctuations in the general level of LIBOR interest rates than to changes in rates in other markets.
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At inception, we designated the interest rate swap as a cash flow hedge and the fair value of the interest rate swap was zero.
−Removed: As of June 28, 2021, the fair value of the interest rate swap was recorded as a liability and as a component of other current liabilities in the amount of $10.0 million.
−Removed: No ineffectiveness was recognized for the quarter and two quarters ended June 28, 2021.
−Removed: During the quarter and two quarters ended June 28, 2021, the interest rate swap increased interest expense by $2.8 million and $5.5 million, respectively.
+Added: As of September 27, 2021, the fair value of the interest rate swap was recorded as a liability in the amount of $7.4 million and included as a component of other current liabilities.
+Added: No ineffectiveness was recognized for the quarter and three quarters ended September 27, 2021.
+Added: During the quarter and three quarters ended September 27, 2021, the interest rate swap increased interest expense by $2.8 million and $8.3 million, respectively.
See Liquidity and Capital Resources and Long-term Debt and Letters of Credit appearing in Part I, Item 2 of this Quarterly Report on Form 10-Q for further discussion of our financing facilities and capital structure.
−Removed: As of June 28, 2021, approximately 96.2% of our total debt was based on fixed rates.
−Removed: Based on our borrowings as of June 28, 2021, an assumed 100 basis point increase in variable rates would cause our annual interest cost to increase by $0.4 million and an assumed 100 basis point decrease in variable rates would cause our annual interest cost to decrease by $0.1 million.
+Added: As of September 27, 2021, approximately 96.2% of our total debt was based on fixed rates.
+Added: Based on our borrowings as of September 27, 2021, an assumed 100 basis point increase in variable rates would cause our annual interest cost to increase by $0.4 million and an assumed 100 basis point decrease in variable rates would cause our annual interest cost to decrease by $0.1 million.
On July 27, 2017, the Financial Conduct Authority (FCA) announced the desire to phase out the use of LIBOR by the end of 2021.
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However, U.S.
−Removed: banking regulators have made clear that U.S.-dollar LIBOR originations should end by no later than December 31, 2021, and that new LIBOR originations prior to that date must provide for an alternative reference rate or a hardwired fallback.
+Added: banking regulators have made clear that U.S.-dollar LIBOR originations should end by no later than December 31, 2021, and that new LIBOR originations prior to that date must provide for an alternative reference rate in existing contracts.
On July 29, 2021, the Alternative Reference Rates Committee (ARRC) announced that it is now formally recommending CME Group’s forward-looking Secured Overnight Financing Rate term rates (SOFR Term Rates).
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During the transition period, LIBOR may exhibit increased volatility or become less representative, and the overnight Treasury repurchase market underlying SOFR may also experience disruptions from time to time, which may result in unexpected fluctuations in SOFR.
−Removed: The use of an alternative reference rate such as SOFR (and the transition to that rate) will likely create challenges for us with respect to our asset liability management activities including, but not limited to, managing the transition-related basis risk.
−Removed: While market activity in SOFR-linked financial instruments has continued to increase, there can be no assurance that SOFR-linked products will be available to meet our needs in a timely manner.
−Removed: Due to these uncertainties, we are unable to predict at this time the impact the transition from LIBOR to an alternative reference rate (or rates) could have on our business, risk management practices (including, but not limited to, our hedging activities), financial condition and results of operations.
Foreign Currency Exchange Rate Risks
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Dollar as a normal part of our financial reporting process.
−Removed: Most of our foreign operations have the U.S.
−Removed: Dollar as their functional currency, however, two of our China facilities utilize the Renminbi (RMB), which results in recognition of translation adjustments included as a component of other comprehensive loss.
+Added: Most of our foreign
+Added: operations have the U.S.
+Added: Dollar as their functional currency, however, two of our China facilities utilize the Renminbi (RMB), which results in recognition of translation adjustments included as a component of other comprehensive income ( loss ) .
Our foreign exchange exposure results primarily from employee-related and other costs of running our operations in foreign countries, foreign currency denominated purchases and translation of balance sheet accounts denominated in foreign currencies.
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Our foreign subsidiaries may at times enter into forward exchange contracts to manage foreign currency risks in relation to certain purchases of machinery denominated in foreign currencies other than our functional currencies.
−Removed: The notional amount of the foreign exchange contracts as of June 28, 2021 and December 28, 2020 was approximately $1.2 million (JPY 132.3 million) and $1.2 million (JPY 125.0 million), respectively.
+Added: The notional amount of the foreign exchange contracts as of September 27, 2021 and December 28, 2020 was approximately $1.2 million (JPY 132.3 million) and $1.2 million (JPY 125.0 million), respectively.
We designated certain of these foreign exchange contracts as cash flow hedges.
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We are hedging copper as a proxy for hedging laminate.
−Removed: As of June 28, 2021, we had commodity contracts with a notional quantity of 500 metric tonnes each for the periods (i) beginning June 29, 2021 and ending on September 23, 2021, (ii) beginning September 28, 2021 and ending on December 30, 2021, (iii) beginning January 4, 2022 and ending on March 31, 2022, and (iv) beginning April 5, 2022 and ending on June 29, 2022.
−Removed: As of June 28, 2021, the fair value of the commodity contracts was recorded as an asset in the amount of $99 and included as a component of prepaid expenses and other current assets.
+Added: As of September 27, 2021, we had commodity contracts with a notional quantity of 500 metric tonnes each for the periods (i) beginning September 28, 2021 and ending on December 30, 2021, (ii) beginning January 4, 2022 and ending on March 31, 2022, and (iii) beginning April 5, 2022 and ending on June 29, 2022, and 630 metric tonnes for the period beginning June 30, 2022 and ending on October 3, 2022.
+Added: As of September 27, 2021, the fair value of the commodity contracts was recorded as a liability in the amount of $65 and included as a component of other current liabilities.
We will continue to evaluate our commodity risks and may utilize commodity forward purchase contracts more frequently in the future.
Debt Instruments
−Removed: The table below presents the fiscal calendar maturities of long-term debt through 2025 and thereafter of our debt instruments as of June 28, 2021:
−Removed: As of June 28, 2021
+Added: The table below presents the fiscal calendar maturities of long-term debt through 2025 and thereafter of our debt instruments as of September 27, 2021:
+Added: As of September 27, 2021
Remaining 2021
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Interest Rate Swap Contracts
−Removed: As of June 28, 2021, the fair value of the interest rate swap was recorded as a liability and as a component of other current liabilities in the amount of $10.0 million.
−Removed: The table below presents information regarding our interest rate swap during the two quarters ended June 28, 2021:
−Removed: Two Quarters Ended
−Removed: June 28, 2021
+Added: As of September 27, 2021, the fair value of the interest rate swap was recorded as a liability and as a component of other current liabilities in the amount of $7.4 million.
+Added: The table below presents information regarding our interest rate swap during the three quarters ended September 27, 2021:
+Added: Three Quarters Ended
+Added: September 27, 2021
(In thousands, except interest rates)
4 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.