Derivative Instruments and Hedging Activities

3 Months Ended

Apr. 01, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

17. Derivative Instruments and Hedging Activities

Derivative Instruments - Cash Flow Hedges

The Company’s cash flow hedges are designed to mitigate the risk of exposure to variability in expected future cash flows of recognized assets, liabilities, or any unrecognized forecasted transactions. Since July 2022, the Company has entered into various interest rate swaps that are designated as cash flow hedges on a substantial portion of the outstanding debt. The interest rate swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s long-term debt to an average fixed interest rate of 2.87%. These contracts, carried at fair value, have maturities of approximately four years. All hedging relationships were highly effective at achieving offsetting changes in cash flows attributable to the risk being hedged. The Company used a regression analysis at hedge inception to assess the effectiveness of cash flow hedge and periodically hereafter.

The Company records gains and losses from the changes in the fair value of these instruments as a component of other comprehensive (loss) income. Deferred gains or losses from these designated cash flow hedges are reclassified into earnings in the period that the hedged items affects earnings. The Company does not offset fair value amounts recognized for derivative instruments in its condensed consolidated balance sheets for presentation purposes. The following table summarizes the fair value of the hedging instruments, presented on a gross basis, as of April 1, 2023 and December 31, 2022.


		Condensed Consolidated Balance Sheets
(in millions)	Balance sheet classification	April 1, 2023		December 31, 2022
Interest rate contracts, inclusive of accrued interest	Other non-current assets	$	14.2	$	19.7
Total		$	14.2	$	19.7

The following table summarizes the gains (losses) reclassified from accumulated other comprehensive (loss) income to the condensed consolidated financial statements for the three months ended April 1, 2023 and April 2, 2022.


		Condensed Consolidated Statement of Operations
(in millions)	Location of gains (losses)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Cash flow hedges - interest rate contracts	Non-operating (losses)	$	(3.0)	$	—
Total		$	(3.0)	$	—

The following tables summarize the changes in accumulated other comprehensive (losses) income related to the hedging instruments for the three months ended April 1, 2023 and April 2, 2022.


(in millions)	April 1, 2023		April 2, 2022
Beginning balance	$	19.3	$	—
Amount recognized in other comprehensive (loss) income	(2.7)		—
Amount reclassified into earnings	(3.0)		—
Ending balance	$	13.6	$	—

The net of tax unrealized loss was $4.3 million as of April 1, 2023.

The Company expects to reclassify a net amount of gains of $11.4 million from accumulated other comprehensive (loss) income gain to non-operating loss within the next 12 months.