Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Derivative Financial Instruments

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Note 9 - Derivative Financial Instruments
 3 Months Ended
Apr. 03, 2016
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
9.
Derivative financial instruments
 
The Company enters into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican Peso denominated payroll, rent and utility cash flows for the nine remaining months of fiscal 2016 and first three months of fiscal 2017. These contracts are effective economic hedges but do not qualify for hedge accounting under ASC 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these derivative contracts are recognized into net earnings in the consolidated statement of operations and comprehensive loss. The Company does not enter into forward foreign exchange contracts for trading or speculative purposes.
 
The following table presents a summary of the outstanding foreign currency forward contracts as at April 3, 2016:
 
Currency
Buy/Sell
Foreign Currency Amount
 
Notional Contract Value in USD
 
Canadian Dollar
Buy
CAD $7,800
 
$
5,928
 
Mexican Peso
Buy
MXN 272,551
 
$
16,550
 
 
The unrealized gain recognized in earnings as a result of revaluing the instruments to fair value on April 3, 2016 was $1,046 (March 29, 2015 – $318 unrealized loss) which was included in cost of sales in the interim consolidated statement of operations and comprehensive income (loss). The realized loss on settled contracts was $932 (March 29, 2015 – realized loss $854), which is also included in of cost of sales. Fair value is determined using the market approach with valuation based on market observables (Level 2 quantitative inputs in the hierarchy set forth under ASC 820 “Fair Value Measurements”).
 
 
 
April 3,
2016
 
 
January 3, 2016
 
Average USD:CAD contract rate
 
 
1.31
 
 
 
1.26
 
Average USD:CAD mark-to-market rate
 
 
1.30
 
 
 
1.38
 
Average USD:PESO contract rate
 
 
16.51
 
 
 
15.88
 
Average USD:PESO mark-to-market rate
 
 
17.65
 
 
 
17.47
 
 
The derivative asset as at April 3, 2016 was $67 ($Nil as at January 3, 2016 ) and derivative liabilities as at April 3, 2016 was $1,108 ($2,087 as at January 3, 2016) which reflected the fair market value of the unsettled forward foreign exchange contracts.