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Derivative Instruments and Hedging Activities
 9 Months Ended
Oct. 02, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
The Company selectively uses derivative and non-derivative instruments to manage market risk associated with changes in interest rates and foreign currency exchange rates. The use of derivatives is intended for hedging purposes only, and the Company does not enter into derivative transactions for speculative purposes.
Credit risk represents the Company’s gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract. The Company generally enters into master netting arrangements that reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company does not have any derivative instruments with credit-risk related contingent features that would require it to post collateral.
Interest Rate Hedging Instruments
The Company’s interest rate risk relates primarily to interest rate exposures on variable rate debt, including the Revolving Credit Facility and Term Loan. See Note 8 for additional information on the currently outstanding components of the Revolving Credit Facility and Term Loan. The Company entered into interest rate cap and swap agreements to hedge the related risk of the variability to the Company’s cash flows due to the rates specified for these credit facilities.
The Company designates certain interest rate derivative instruments as cash flow hedges, including the outstanding interest rate swap. The Company records gains and losses due to changes in fair value of the derivatives within Other comprehensive (loss) income (“OCI”) and reclassifies these amounts to Interest expense, net in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the hedge is prospectively de-designated. The pre-tax unrealized gain of $10.4 million within OCI as of October 2, 2022 is expected to be reclassified to earnings in the next 12 months.
The following table summarizes the Company’s interest rate derivative agreements as of October 2, 2022:
Instrument
Notional Amount (1)
(In millions)
DescriptionHedge DesignationEffective DateExpiration Date
Interest rate cap$1,000.0 
Interest rate cap amount
of 3.428%
Non-designatedMay 29, 2022December 31, 2023
Interest rate swap$1,000.0 
Pay 1.58% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeMay 29, 2022December 31, 2023
(1) The notional value of these instruments is expected to be $500.0 million in 2023.
Subsequent to October 2, 2022, the Company entered into interest rate swap contracts, commencing on December 30, 2022, with a total notional value of $1.3 billion through December 29, 2023 and $1.8 billion subsequently, to hedge future interest
rate exposures on variable rate debt, including the Revolving Credit Facility and Term Loan. The following table summarizes these interest rate derivative agreements:
Notional Amount
(In millions)		DescriptionHedge DesignationEffective DateExpiration Date
$397.2 
Pay 3.765% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeDecember 30, 2022May 27, 2027
144.4 
Pay 3.7725% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeDecember 30, 2022May 27, 2027
216.7 
Pay 3.7675% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeDecember 30, 2022May 27, 2027
288.9 
Pay 3.7575% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeDecember 30, 2022May 27, 2027
252.8 
Pay 3.7725% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeDecember 30, 2022May 27, 2027
Additionally, subsequent to October 2, 2022, the Company amended the termination date for the interest rate cap to December 30, 2022.
Currency Hedging Instruments
The Company has currency risk exposures relating primarily to foreign currency denominated monetary assets and liabilities and forecasted foreign currency denominated intercompany and third-party transactions. The Company uses foreign currency forward contracts and may use option contracts and cross currency swaps to manage its currency risk exposures. The Company’s foreign currency forward contracts are denominated primarily in Australian Dollar, Brazilian Real, British Pound, Canadian Dollar, Chilean Peso, Chinese Yuan/Renminbi, Colombian Peso, Euro, Indian Rupee, Japanese Yen, Mexican Peso, Philippine Peso, Singapore Dollar, Swiss Franc and the Thai Baht.
The Company designates certain foreign currency forward contracts as cash flow hedges. The Company records gains and losses due to changes in fair value of the derivatives within OCI and reclassifies these amounts to Cost of sales, excluding amortization of intangibles in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the hedge is prospectively de-designated. The pre-tax unrealized income of $4.6 million within OCI as of October 2, 2022 is expected to be reclassified to earnings in the next 12 months.
The Company also enters into foreign currency forward contracts that are not part of designated hedging relationships and which are intended to mitigate exchange rate risk of monetary assets and liabilities and related forecasted transactions. The Company records these non-designated derivatives at mark-to-market with gains and losses recognized in earnings within Other income, net.
The following table provides details of the currency hedging instruments outstanding as of October 2, 2022:
DescriptionNotional Amount
(In millions)		Hedge Designation
Foreign currency forward contracts$125.1 Cash Flow Hedge
Foreign currency forward contracts543.8 Non-designated
The following table summarizes pre-tax gains and losses from designated derivative and non-derivative instruments within accumulated other comprehensive (loss) income (“AOCI”) for the three and nine months ended October 2, 2022:
Designated Hedging Instruments
(In millions)Amount of Loss (Gain) Recognized in OCI on HedgesLocation of Amounts Reclassified From AOCI Into IncomeAmount of Loss (Gain) Reclassified From AOCI Into Income
Three Months Ended October 2, 2022
Foreign currency forward contracts (sales)$(2.6)Total revenues$(0.7)
Foreign currency forward contracts (purchases)(0.6)Cost of sales, excluding amortization of intangibles(0.1)
Interest rate derivatives(7.9)Interest expense, net0.4 
Nine Months Ended October 2, 2022
Foreign currency forward contracts (sales)$(5.0)Total revenues$(0.9)
Foreign currency forward contracts (purchases)(0.8)Cost of sales, excluding amortization of intangibles(0.1)
Interest rate derivatives(11.0)Interest expense, net1.7 
Gains and losses from designated derivative and non-derivative instruments within AOCI for the three and nine months ended October 3, 2021 were not material.
The following table summarizes the fair value of designated and non-designated hedging instruments recognized within the Consolidated Balance Sheets as of October 2, 2022 and January 2, 2022:
(In millions)October 2, 2022January 2, 2022
Designated cash flow hedges
Interest rate derivatives:
Other assets$18.4 $— 
Foreign currency forward contracts:
Prepaid expenses and other current assets7.9 0.1 
Other current liabilities4.0 0.2 
Non-designated hedging instruments
Interest rate derivatives:
Other assets3.2 — 
Foreign currency forward contracts:
Prepaid expenses and other current assets7.9 — 
Other current liabilities5.3 0.1