Financial Instruments and Risk Management

12 Months Ended

Dec. 31, 2022

Disclosure Financial Instruments and Risk Management [Abstract]

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 Type	December 31, 2022		January 1, 2022
U.S. dollar equivalent notional amount of derivative instruments:
Forward foreign exchange contracts	Cash Flow and Mark to Market	$	397,908	$	308,071
Cross-currency swap contracts	Cash Flow	$	352,920	$	352,920
Cross-currency swap contracts	Net Investment	$	335,940	$	335,940

Fair Values of Derivative Instruments

The fair values of derivative instruments related to forward foreign exchange contracts and cross-currency swap contracts recognized in the Consolidated Balance Sheets of the Company were as follows:


	Balance Sheet Location	Fair Value
		December 31, 2022		January 1, 2022
Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Other current assets	$	1,892	$	2,898
Cross-currency swap contracts	Other current assets	1,033		974
Forward foreign exchange contracts	Other noncurrent assets	110		83
Cross-currency swap contracts	Other noncurrent assets	16,477		1,979
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Other current assets	5,402		5,439
Total derivative assets		24,914		11,373

Derivatives designated as hedging instruments:
Forward foreign exchange contracts	Accrued liabilities and other: Other	(1,263)		(349)
Cross-currency swap contracts	Accrued liabilities and other: Other	(252)		(222)
Forward foreign exchange contracts	Other noncurrent liabilities	(178)		(14)
Cross-currency swap contracts	Other noncurrent liabilities	(27,753)		(11,387)
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Accrued liabilities and other: Other	(4,841)		(331)
Total derivative liabilities		(34,287)		(12,303)

Net derivative liability		$	(9,373)	$	(930)

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 December 31, 2022. 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 $1,457. The Company is hedging exposure to the variability in future foreign currency-denominated cash flows for forecasted transactions over the next 14 months and for long-term debt over the next 18 months.

The effect of derivative instruments designated as cash flow hedges on the Consolidated Statements of Income and AOCI is as follows:


	Amount of Gain (Loss) Recognized in AOCI on Derivative Instruments
	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021

Forward foreign exchange contracts	$	10,843	$	12,170	$	(15,643)
Cross-currency swap contracts	(22,305)		(14,942)		—
Total	$	(11,462)	$	(2,772)	$	(15,643)


	Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
		Years Ended
		December 31, 2022		January 1, 2022		January 2, 2021


Forward foreign exchange contracts(1)	Cost of sales	$	11,336	$	(15,301)	$	10,069
Forward foreign exchange contracts(1)	Income (loss) from discontinued operations, net of tax	(307)		(3,542)		5,612
Cross-currency swap contracts(1)	Selling, general and administrative expenses	(20,016)		(12,155)		—
Cross-currency swap contracts(1)	Interest expense, net	(5,940)		(3,556)		—
Total		$	(14,927)	$	(34,554)	$	15,681

(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.

The following table presents the amounts in the Consolidated Statements of Income in which the effects of cash flow hedges are recorded:


	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
Cost of sales	$	4,012,542	$	4,149,541	$	4,524,461
Selling, general and administrative expenses	$	1,701,563	$	1,853,971	$	1,560,034
Interest expense, net	$	157,073	$	163,067	$	164,238
Income (loss) from discontinued operations, net of tax	$	3,965	$	(443,744)	$	(43,292)

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 December 31, 2022 and January 1, 2022, the U.S. dollar equivalent carrying value of Euro-denominated long-term debt designated as a partial European net investment hedge was $214,110 and $227,454, respectively.

The amount of after-tax gains (losses) included in AOCI in the Consolidated Balance Sheets related to derivative instruments and nonderivative financial instruments designated as net investment hedges are as follows:


	Amount of Gain (Loss) Recognized in AOCI
	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
Euro-denominated long-term debt	$	9,716	$	24,928	$	(36,609)
Cross-currency swap contracts	14,497		13,670		(14,404)
Total	$	24,213	$	38,598	$	(51,013)

The effect of derivative and non-derivative instruments designated as net investment hedges on the Consolidated Statements of Income are as follows:


	Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
		Years Ended
		December 31, 2022		January 1, 2022		January 2, 2021
Euro-denominated long-term debt	Income (loss) from discontinued operations, net of tax	$	(13,348)	$	—	$	—
Cross-currency swap contracts	Income (loss) from discontinued operations, net of tax	(2,505)		—		—
Cross-currency swap contracts (amounts excluded from effectiveness testing)	Interest expense, net	8,368		7,389		7,637
Total		$	(7,485)	$	7,389	$	7,637

The following table presents the amounts in the Consolidated Statements of Income in which the amounts excluded from effectiveness testing for net investment hedges are recorded:


	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
Income (loss) from discontinued operations, net of tax	$	3,965	$	(443,744)	$	(43,292)
Interest expense, net	$	157,073	$	163,067	$	164,238

Mark to Market Hedges

Derivatives used in mark to market hedges are not designated as hedges under the accounting standards. 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. 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 instruments not designated as hedges on the Consolidated Statements of Income is as follows:


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income
		Years Ended
		December 31, 2022		January 1, 2022		January 2, 2021
Forward foreign exchange contracts	Cost of sales	$	(16,557)	$	24,087	$	(16,163)
Forward foreign exchange contracts	Selling, general and administrative expenses	(290)		2,784		(2,029)
Forward foreign exchange contracts	Income (loss) from discontinued operations, net of tax	—		4,706		(3,707)
Total		$	(16,847)	$	31,577	$	(21,899)