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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 28, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Interest Rate Swaps In April 2022, to economically hedge the interest rate risk of the Senior Secured Credit Facilities (as defined in Note 12), we entered into five variable-to-fixed interest rate swap agreements. Three of the interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term Loan B Facility (as defined in Note 12). The interest rate swaps cover an interest period ranging from June 1, 2022, through April 1, 2029, on notional balances that decline from $1.0 billion to $812.5 million over the term. The other two interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term Loan A Facility (as defined in Note 12). The interest rate swaps covered an interest period ranging from June 1, 2022, through April 1, 2027, on notional balances that decline from $487.5 million to $387.5 million over the term. In November 2023, to economically hedge the interest rate risk of the $300.0 million Term B Loan add-on (as defined in Note 12), we entered into four variable-to-fixed interest rate swap agreements. The interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term B Loans. In September 2024, we elected to fully de-designate these four interest rate swap agreements and discontinued hedge accounting as a result of the reduction in our variable rate debt (refer to Note 12), and entered into one additional undesignated fixed-to-variable interest rate swap agreement to offset the de-designated interest rate swap agreements. As a result, the $14.4 million loss reported in AOCI related to the de-designated interest rate swap agreements was reclassified into earnings immediately as the forecasted transaction (i.e. interest payments) will no longer occur. These five interest rate swap agreements are carried at fair value and are not designated as hedging instruments. Changes in fair value of the derivative instruments are recognized in other income (expense), net in the Condensed Consolidated Statement of Operations, in the current period, along with offsetting foreign currency gain or loss on the underlying assets or liabilities. In May 2024, we cash settled the remaining notional of $712.5 million variable-to-fixed interest rate swap agreements at market rates. The termination resulted in cash proceeds of $41.2 million, for which the gain remains deferred in Other Comprehensive Income ("OCI") and will be recognized within Interest expense, net as interest is paid on the Senior Secured Credit Facilities. The proceeds are recognized as cash flows from operating activities within the Statement of Cash Flows for the nine months ended September 28, 2024. Additionally, to economically hedge the interest rate risk of the Term Loan B Facility, we entered into new variable-to-fixed interest rate swap agreements to replace the terminated interest rate swaps during the second quarter of 2024. The interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term Loan B Facility. The interest rate swaps cover an interest period ranging from May 9, 2024, through April 1, 2029, on notional balances of $712.5 million over the term. As a designated cash flow hedge, gains and losses will be deferred in AOCI and recognized within Interest expense, net when interest is paid on the Senior Secured Credit Facilities. Cross-currency Swaps In October 2022, we entered into three fixed-for-fixed cross currency interest rate swaps at market rates and designated the instruments as net investment hedges on our investment in European operations. As a designated net investment hedge, the loss related to the EUR spot exchange rate on the settled swaps was deferred within the Cumulative Translation Adjustment, a component of AOCI, and will not be recognized in the Statement of Operations until the hedged EUR net investment is substantially liquidated. The following are the terms and notional amounts outstanding: •$700.0 million notional amount outstanding from October 25, 2022 through March 15, 2026; •$100.0 million notional amount outstanding from October 25, 2022 through June 15, 2030; and •$152.5 million notional amount outstanding from August 2, 2024 through April 20, 2027. On November 21, 2023, we entered into fixed-for-fixed cross currency interest rate swaps designated as net investment hedges to hedge the EUR currency exposure of our investment in European operations. The following are the terms and notional amount outstanding: •$300.0 million notional amount outstanding from November 21, 2023 through April 20, 2027. In May 2024, we cash settled $547.5 million notional amount outstanding of the original $700.0 million cross currency interest rate swap outstanding from October 25, 2022 through December 15, 2024. The settlement resulted in cash outflows of $41.4 million recognized as part of cash flows for investing activities within the Statement of Cash Flows for the nine months ended September 28, 2024. On August 2, 2024 we restructured the $152.5 million remaining notional amount outstanding of the original $700.0 million cross-currency interest rate swap to extend the maturity to April 2027. There was no cash outflow as a result of the restructuring. On May 7, 2024, we entered into new fixed-for-fixed cross currency interest rate swaps designated as net investment hedges to hedge the EUR currency exposure of our investment in European operations. The following are the terms and notional amount outstanding: •$547.5 million notional amount outstanding from May 7, 2024 through April 20, 2027. On September 17, 2024, we entered into new fixed-for-fixed cross currency interest rate swaps designated as net investments hedges to hedge the EUR currency exposure of our investment in European operations. The following are the terms and notional amounts outstanding: •$300.0 million notional amount outstanding from September 17, 2024 through September 30, 2028; •$215.0 million notional amount outstanding from September 17, 2024 through June 15, 2030; and •$200.0 million notional amount outstanding from September 17, 2024 through September 30, 2032. As a designated net investment hedge, gains and losses related to the EUR spot exchange rate will be deferred within the Cumulative Translation Adjustment, a component of AOCI, and recognized in the Statement of Operations when the hedged EUR net investment is substantially liquidated. Gains and losses on excluded components (e.g., interest differentials) will be recorded in Interest expense, net on a systematic and rational basis. Other Hedging Instruments On September 17, 2024, we designated €350.0 million of the 2032 Notes (as defined in Note 12) as a net investment hedge on our investment in European operations. As a designated net investment hedge, gains and losses related to the EUR spot exchange rate will be deferred within the Cumulative Translation Adjustment, a component of AOCI, and recognized in the Statement of Operations when the hedged EUR net investment is substantially liquidated. Foreign Currency Forwards Notional amounts of foreign currency forward contracts were as follows (in millions):
|  | September 28, 2024 |  | December 31, 2023
British Pound (GBP) |  | $ | 144.6 |  |  | $ | 72.4 |
Swedish Krona (SEK) |  | 90.5 |  |  | 36.5 |
European Euro (EUR) |  | 59.7 |  |  | 79.9 |
Danish Krone (DKK) |  | 64.3 |  |  | 5.9 |
United States Dollar (USD) |  | 83.8 |  |  | 22.1 |
Canadian Dollar (CAD) |  | 37.7 |  |  | 7.1 |
Chinese Yuan (CNH) |  | 34.2 |  |  | 14.1 |
Polish Zloty (PLZ) |  | 30.2 |  |  | 3.8 |
Norwegian Krone (NOK) |  | 5.3 |  |  | 4.4 |
Hungarian Forint (HUF) |  | 5.6 |  |  | 3.9 |
Other |  | 8.7 |  |  | 3.5 |
Total |  | $ | 564.6 |  |  | $ | 253.6 |
The maximum term of our forward currency exchange contracts is 60 months. Effects of Derivatives on the Financial Statements The below tables indicate the effects of all derivative instruments on the Condensed Consolidated Financial Statements. All amounts exclude income tax effects. The balance sheet location and gross fair value of our derivative instruments were as follows (in millions):
| Balance Sheet Location |  | September 28, 2024 |  | December 31, 2023
Designated derivative assets: |  |  |  |  |
Foreign currency forward contracts | Prepaid expenses and other current assets |  | $ | 1.3 |  |  | $ | — |
Foreign currency forward contracts | Other non-current assets |  | 0.7 |  |  | 0.4 |
Interest rate swap agreements | Other non-current assets |  | 1.8 |  |  | 30.5 |
Total designated derivative assets |  |  | $ | 3.8 |  |  | $ | 30.9 |
Non-designated derivative assets: |  |  |  |  |
Foreign currency forward contracts | Prepaid expenses and other current assets |  | $ | 0.6 |  |  | $ | 0.2 |
Total non-designated derivative assets |  |  | $ | 0.6 |  |  | $ | 0.2 |
Designated derivative liabilities: |  |  |  |  |
Foreign currency forward contracts | Other accrued liabilities |  | $ | 2.1 |  |  | $ | — |
Foreign currency forward contracts | Other non-current liabilities |  | 0.2 |  |  | — |
Cross-currency swap | Other accrued liabilities |  | — |  |  | 75.1 |
Cross-currency swap | Other non-current liabilities |  | 152.6 |  |  | 96.9 |
Interest rate swap agreements | Other non-current liabilities |  | 31.3 |  |  | 11.7 |
Total designated derivative liabilities |  |  | $ | 186.2 |  |  | $ | 183.7 |
Non-designated derivative liabilities: |  |  |  |  |
Foreign currency forward contracts | Other accrued liabilities |  | $ | 1.6 |  |  | $ | 2.7 |
Interest rate swap agreements | Other non-current liabilities |  | 14.3 |  |  | — |
Total non-designated derivative liabilities |  |  | $ | 15.9 |  |  | $ | 2.7 |
The amounts of (income)/expense recognized in earnings related to our non-designated derivatives on the Consolidated Statements of Operations were as follows (in millions):
|  |  |  | Three Months Ended |  | Nine Months Ended
Non-Designated Derivatives |  | Income Statement Location |  | September 28, 2024 |  | September 30, 2023 |  | September 28, 2024 |  | September 30, 2023
Foreign currency forward contracts |  | Other (income) expense, net |  | $ | (0.9) |  |  | $ | (0.3) |  |  | $ | (4.2) |  |  | $ | (4.7) |
|  | Interest expense, net |  | — |  |  | (1.6) |  |  | — |  |  | (2.2) |
|  |  |  | $ | (0.9) |  |  | $ | (1.9) |  |  | $ | (4.2) |  |  | $ | (6.9) |
The following tables summarize the effect of derivative instruments designated as hedging instruments in AOCI (in millions):
|  |  |  | Gain or (Loss) Reclassified from AOCI into Earnings
|  |  |  | Related to Amounts Included in Effectiveness Testing |  | Related to Amounts Excluded from Effectiveness Testing
|  | Amount of Gain or (Loss) Recognized in OCI(1) |  | Location of Gain or (Loss) |  | Amount Reclassified(2) |  | Location of Gain or (Loss) |  | Amount Reclassified(2)
Three Months Ended September 28, 2024 |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | $ | (28.4) |  |  | Interest expense, net |  | $ | 8.9 |  |  | Interest expense, net |  | $ | — |
Foreign currency forward contracts |  | (0.1) |  |  | Net sales |  | (0.3) |  |  | Net sales |  | (0.3) |
|  |  |  | Cost of sales |  | 0.2 |  |  | Cost of sales |  | (0.2) |
|  |  |  |  |  |  |  | Other (income) expense, net |  | (0.3) |
Total Cash flow hedges |  | $ | (28.5) |  |  |  |  | $ | 8.8 |  |  |  |  | $ | (0.8) |
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap |  | $ | (72.9) |  |  |  |  |  |  | Interest expense, net |  | $ | 6.9 |
Euro Notes Due 2032 |  | $ | (1.8) |  |  |  |  |  |  |  |  |
Nine Months Ended September 28, 2024 |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | $ | 11.7 |  |  | Interest expense, net |  | $ | 25.3 |  |  | Interest expense, net |  | $ | — |
Foreign currency forward contracts |  | (0.6) |  |  | Net sales |  | (0.4) |  |  | Net sales |  | (0.8) |
|  |  |  | Cost of sales |  | 0.3 |  |  | Cost of sales |  | (0.7) |
|  |  |  |  |  |  |  | Other (income) expense, net |  | 0.3 |
Total Cash flow hedges |  | $ | 11.1 |  |  |  |  | $ | 25.2 |  |  |  |  | $ | (1.2) |
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap |  | $ | (6.6) |  |  |  |  |  |  | Interest expense, net |  | $ | 21.1 |
Euro Notes Due 2032 |  | $ | (1.8) |  |  |  |  |  |  |  |  |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | $ | 17.7 |  |  | Interest expense, net |  | $ | 6.4 |  |  | Interest expense, net |  | $ | — |
Foreign currency forward contracts |  | (6.8) |  |  | Net sales |  | (0.2) |  |  | Net sales |  | 0.2 |
|  |  |  | Cost of sales |  | 0.2 |  |  | Cost of sales |  | 0.1 |
|  |  |  |  |  |  |  | Other (income) expense, net |  | — |
Total Cash flow hedges |  | $ | 10.9 |  |  |  |  | $ | 6.4 |  |  |  |  | $ | 0.3 |
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap |  | $ | 40.1 |  |  |  |  |  |  | Interest expense, net |  | $ | 6.4 |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | $ | 20.9 |  |  | Interest expense, net |  | $ | 16.2 |  |  | Interest expense, net |  | $ | — |
Foreign currency forward contracts |  | (17.0) |  |  | Net sales |  | — |  |  | Net sales |  | 0.4 |
|  |  |  | Cost of sales |  | 0.4 |  |  | Cost of sales |  | 0.1 |
|  |  |  |  |  |  |  | Other (income) expense, net |  | (0.5) |
Total Cash flow hedges |  | $ | 3.9 |  |  |  |  | $ | 16.6 |  |  |  |  | $ | — |
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap |  | $ | (0.1) |  |  |  |  |  |  | Interest expense, net |  | $ | 19.2 |
(1) Net income of $17.7 million is expected to be reclassified out of AOCI into earnings during the next 12 months. (2) For additional details about the effect of the amounts reclassified from AOCI refer to Note 14. The classification and amount of gain/(loss) recognized in earnings on fair value and hedging relationships were as follows (in millions):
|  | Net Sales |  | Cost of Sales |  | Interest Expense, net |  | Other (Income) Expense, net
Three Months Ended September 28, 2024 |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded |  | $ | 1,087.5 |  |  | $ | 683.1 |  |  | $ | 57.6 |  |  | $ | (4.1) |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | (0.3) |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | — |
Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach |  | $ | (0.3) |  |  | $ | (0.2) |  |  | $ | — |  |  | $ | (0.3) |
Interest rate swap agreements |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | — |  |  | $ | — |  |  | $ | 8.9 |  |  | $ | — |
Nine Months Ended September 28, 2024 |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded |  | $ | 3,235.1 |  |  | $ | 2,078.3 |  |  | $ | 144.7 |  |  | $ | (0.5) |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | (0.4) |  |  | $ | 0.3 |  |  | $ | — |  |  | $ | — |
Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach |  | $ | (0.8) |  |  | $ | (0.7) |  |  | $ | — |  |  | $ | 0.3 |
Interest rate swap agreements |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | — |  |  | $ | — |  |  | $ | 25.3 |  |  | $ | — |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded |  | $ | 1,123.8 |  |  | $ | 712.6 |  |  | $ | 43.5 |  |  | $ | (0.6) |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | (0.2) |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | — |
Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach |  | $ | 0.2 |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | — |
Interest rate swap agreements |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | — |  |  | $ | — |  |  | $ | 6.4 |  |  | $ | — |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded |  | $ | 3,498.7 |  |  | $ | 2,245.6 |  |  | $ | 131.1 |  |  | $ | (9.6) |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | — |  |  | $ | 0.4 |  |  | $ | — |  |  | $ | — |
Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach |  | $ | 0.4 |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | (0.5) |
Interest rate swap agreements |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into earnings |  | $ | — |  |  | $ | — |  |  | $ | 16.2 |  |  | $ | — |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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