FY2021 10-K Document - FINAL 11 15 21 - Flipbook - Page 39
Table of Contents
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1, Summary of Significant Accounting Policies, included in Item 8, Financial Statements and Supplementary
Data of this report for further information regarding Financial Accounting Standards Board issued Accounting
Standards Updates ("ASU").
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, we are exposed to interest rate risk from our long-term debt and foreign exchange
rate risk related to our foreign operations and foreign currency transactions. To manage these risks, we may enter into
derivative instruments such as interest rate swaps and foreign currency contracts. We do not hold or issue financial
instruments for trading purposes. In 2021, our derivative instruments consisted of interest rate swaps designated as
cash flow hedges and foreign currency contracts.
At October 2, 2021, we had $409 million of borrowings subject to variable interest rates. At October 2, 2021, we had
no outstanding interest rate swaps. During 2021, our average borrowings subject to variable interest rates, after
adjusting for interest rate swaps, were $456 million and, therefore, if interest rates had been one percentage point
higher during 2021, our interest expense would have been $5 million higher.
We also enter into forward contracts to reduce fluctuations in foreign currency cash flows related to third party
purchases and revenue, intercompany product shipments and to reduce exposure on intercompany balances that are
denominated in foreign currencies. We have foreign currency contracts with notional amounts of $172 million
outstanding at October 2, 2021 that mature at various times through June 2, 2023. These include notional amounts of
$151 million outstanding where the U.S. dollar is one side of the trade. The net fair value of all of our foreign currency
contracts involving the U.S. dollar was a $2 million net liability at October 2, 2021. A hypothetical 10% increase in the
value of the U.S. dollar against all currencies would decrease the fair value of our foreign currency contracts at
October 2, 2021 by approximately $14 million, while a hypothetical 10% decrease in the value of the U.S. dollar
against all currencies would increase the fair value of our foreign currency contracts at October 2, 2021 by
approximately $17 million. It is important to note that gains and losses indicated in the sensitivity analysis would often
be offset by gains and losses on the underlying receivables and payables.
Although the majority of our sales, expenses and cash flows are transacted in U.S. dollars, we have exposure to
changes in foreign currency exchange rates such as the Euro, British pound and Japanese yen. If average annual
foreign exchange rates collectively weakened or strengthened against the U.S. dollar by 10%, our net earnings in
2021 would have decreased or increased by $6 million from foreign currency translation. This sensitivity analysis
assumed that each exchange rate would change in the same direction relative to the U.S. dollar and excludes the
potential effects that changes in foreign currency exchange rates may have on actual transactions.
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