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Financial Instruments and Risk Management
 6 Months Ended
Jul. 03, 2021
Disclosure Financial Instruments and Risk Management [Abstract]  
Financial Instruments and Risk Management Financial Instruments and Risk Management
The Company uses forward foreign exchange contracts and cross-currency swap contracts to manage its exposures to movements in foreign exchange rates primarily related to the Euro, Australian dollar, Canadian dollar and Mexican peso. The Company also uses a combination of cross-currency swap contracts and long-term debt to manage its exposure to foreign currency risk associated with the Company’s net investment in certain European subsidiaries.
Hedge TypeJuly 3,
2021		January 2,
2021
U.S. dollar equivalent notional amount of derivative instruments:
Forward foreign exchange contractsCash Flow and
Mark to Market		$355,633 $617,912 
Cross-currency swap contractsCash Flow$352,920 $— 
Cross-currency swap contractsNet Investment$335,940 $335,940 
Fair Values of Derivative Instruments
The fair values of derivative financial instruments related to forward foreign exchange contracts and cross-currency swap contracts recognized in the Condensed Consolidated Balance Sheets of the Company were as follows:
Balance Sheet LocationFair Value
July 3,
2021		January 2,
2021
Derivatives designated as hedging instruments:
Forward foreign exchange contractsOther current assets$1,989 $1 
Cross-currency swap contractsOther current assets970 918 
Forward foreign exchange contractsCurrent assets of discontinued operations17 40 
Forward foreign exchange contractsOther noncurrent assets732 — 
Cross-currency swap contractsOther noncurrent assets1,723 — 
Derivatives not designated as hedging instruments:
Forward foreign exchange contractsOther current assets1,545 2,459 
Forward foreign exchange contractsCurrent assets of discontinued operations24 198 
Total derivative assets7,000 3,616 
Derivatives designated as hedging instruments:
Forward foreign exchange contractsAccrued liabilities(2,329)(12,898)
Cross-currency swap contractsAccrued liabilities(223)— 
Forward foreign exchange contractsCurrent liabilities of discontinued operations(321)(4,747)
Forward foreign exchange contractsOther noncurrent liabilities— (2,190)
Cross-currency swap contractsOther noncurrent liabilities(9,300)(16,526)
Derivatives not designated as hedging instruments:
Forward foreign exchange contractsAccrued liabilities(4,151)(16,488)
Forward foreign exchange contractsCurrent liabilities of discontinued operations(589)(2,195)
Total derivative liabilities(16,913)(55,044)
Net derivative liability$(9,913)$(51,428)
Cash Flow Hedges
The Company uses forward foreign exchange contracts and cross-currency swap contracts to reduce the effect of fluctuating foreign currencies on foreign currency-denominated transactions, foreign currency-denominated investments and other known foreign currency exposures. Gains and losses on these contracts are intended to offset losses and gains on the hedged transaction in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates.
On April 1, 2021, in connection with a reduction in the amount of the 3.5% Senior Notes designated in the European net investment hedge discussed below, the Company entered into three pay-fixed rate, receive-fixed rate cross-currency swap contracts with a total notional amount of €300,000. The Company designated these cross-currency swap contracts to hedge the undesignated portion of the foreign currency cash flow exposure related to the Company’s 3.5% Senior Notes, which had a carrying amount of €500,000 as of July 3, 2021. These cross-currency swap contracts, which mature on June 15, 2024, swap Euro-denominated interest payments for U.S. dollar-denominated interest payments, thereby economically converting €300,000 of the Company’s €500,000 fixed-rate 3.5% Senior Notes to a fixed-rate 4.7945% USD-denominated obligation.
The Company expects to reclassify into earnings during the next 12 months a net loss from AOCI of approximately $12,581. The Company is hedging exposure to the variability in future foreign currency-denominated cash flows for forecasted transactions over the next 15 months and for long-term debt over the next 36 months.
The effect of cash flow hedge derivative instruments on the Condensed Consolidated Statements of Income and AOCI is as follows:
Amount of Gain (Loss) Recognized in AOCI on Derivative Instruments
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		 June 27,
2020
Forward foreign exchange contracts$(1,392)$(7,051)$7,094 $13,029 
Cross-currency swap contracts717 — 705 — 
Total$(675)$(7,051)$7,799 $13,029 

Location of Gain (Loss)
Reclassified from AOCI 
into Income		Amount of Gain (Loss) Reclassified from AOCI into Income
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Forward foreign exchange contracts(1)
Cost of sales$(5,278)$1,758 $(9,655)$4,627 
Forward foreign exchange contracts(1)
Income (loss) from discontinued operations, net of tax(1,543)1,399 $(1,851)$3,547 
Cross-currency swap contracts(1)
Selling, general and administrative expenses3,168 — $2,611 $— 
Cross-currency swap contracts(1)
Interest expense, net(1,018)— $(1,018)$— 
Total$(4,671)$3,157 $(9,913)$8,174 
(1)The Company does not exclude amounts from effectiveness testing for cash flow hedges that would require recognition into earnings based on changes in fair value.
  
Quarters EndedSix Months Ended
  
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Total cost of sales in which the effects of cash flow hedges are recorded
$1,069,682 $1,029,221 $1,975,030 $1,814,123 
Total selling, general and administrative expenses in which the effects of cash flow hedges are recorded$464,235 $311,729 $876,794 $681,944 
Total interest expense, net in which the effects of cash flow hedges are recorded$42,440 $41,075 $86,900 $77,102 
Total income (loss) from discontinued operations, net of tax in which the effects of cash flow hedges are recorded$(19,187)$24,613 $(410,853)$11,621 
Net Investment Hedges
In July 2019, the Company entered into two pay-fixed rate, receive-fixed rate cross-currency swap contracts with a total notional amount of €300,000 that were designated as hedges of a portion of the beginning balance of the Company’s net investment in certain European subsidiaries. These cross-currency swap contracts, which mature on May 15, 2024, swap U.S. dollar-denominated interest payments for Euro-denominated interest payments, thereby economically converting a portion of the Company’s fixed-rate 4.625% Senior Notes to a fixed-rate 2.3215% Euro-denominated obligation.
In July 2019, the Company also designated the full amount of its 3.5% Senior Notes with a carrying value of €500,000, which is a nonderivative financial instrument, as a hedge of a portion of the beginning balance of the Company’s European net investment. As of April 1, 2021, the Company reduced the amount of its 3.5% Senior Notes designated in the European net investment hedge from €500,000 to €200,000. As of July 3, 2021 and January 2, 2021, the U.S. dollar equivalent carrying value of Euro-denominated long-term debt designated as a partial European net investment hedge was $237,304 and $610,724, respectively.
The amount of after-tax gains (losses) included in AOCI in the Condensed Consolidated Balance Sheets related to derivative instruments and nonderivative financial instruments designated as net investment hedges and the amount of gains included in the “Interest expense, net” line in the Condensed Consolidated Statements of Income related to amounts excluded from the assessment of hedge effectiveness for derivative instruments designated as net investment hedges are as follows:
Amount of Gain (Loss) Recognized in AOCI
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Euro-denominated long-term debt$(1,544)$(4,196)$17,756 $(1,538)
Cross-currency swap contracts(2,066)(1,004)5,307 10,728 
Total$(3,610)$(5,200)$23,063 $9,190 
Location of Gain Recognized in IncomeAmount of Gain Recognized in Income
(Amount Excluded from Effectiveness Testing)
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Cross-currency swap contractsInterest expense, net$1,715 $2,020 $3,614 $3,967 
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Total interest expense, net in which the amounts excluded from effectiveness testing for net investment hedges are recorded
$42,440 $41,075 $86,900 $77,102 
Mark to Market Hedges
A derivative used as a hedging instrument whose change in fair value is recognized to act as a hedge against changes in the values of the hedged item is designated as a mark to market hedge. The Company uses forward foreign exchange derivative contracts as hedges against the impact of foreign exchange fluctuations on existing accounts receivable and payable balances and intercompany lending transactions denominated in foreign currencies. Forward foreign exchange derivative contracts are recorded as mark to market hedges when the hedged item is a recorded asset or liability that is revalued in each accounting period. These contracts are not designated as hedges under the accounting standards and are recorded at fair value in the Condensed Consolidated Balance Sheets. Any gains or losses resulting from changes in fair value are recognized directly into earnings. Gains or losses on these contracts largely offset the net remeasurement gains or losses on the related assets and liabilities.
The effect of derivative contracts not designated as hedges on the Condensed Consolidated Statements of Income is as follows:
Location of Gain (Loss)
Recognized in Income
on Derivatives		Amount of Gain (Loss) Recognized in Income
Quarters EndedSix Months Ended
July 3,
2021		June 27,
2020		July 3,
2021		June 27,
2020
Forward foreign exchange contractsCost of sales$5,629 $(16,081)$18,624 $(9,532)
Forward foreign exchange contractsSelling, general and administrative expenses880 1,962 3,091 928 
Forward foreign exchange contractsIncome (loss) from discontinued operations, net of tax1,314 (3,026)3,953 (3,451)
Total$7,823 $(17,145)$25,668 $(12,055)