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Derivative Instruments and Hedging Activities
 3 Months Ended
Apr. 02, 2023
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 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 its interest rate swaps as cash flow hedges. The Company records gains and losses due to changes in fair value of the derivatives within Other comprehensive income (loss) (“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. Pre-tax unrealized gains of $20.0 million are expected to be reclassified from OCI to earnings in the next 12 months.
The following table summarizes the Company’s interest rate derivative agreements as of April 2, 2023, all of which were interest rate swaps:
Notional Amount
(In millions) (1)
DescriptionHedge DesignationEffective DateExpiration Date
$500.0 
Pay 1.58% fixed, receive floating rate (1-month USD-SOFR)
Designated cash flow hedgeMay 29, 2022December 31, 2023
$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
(1) The notional value of interest rate swap contracts with an effective date of December 30, 2022, is expected to increase to $1.8 billion on December 29, 2023.
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, Euro, Indian Rupee, Japanese Yen, Mexican Peso, 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 Total revenues and 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 loss of $10.5 million within OCI as of April 2, 2023 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 expense (income), net.
The following table provides details of the currency hedging instruments outstanding as of April 2, 2023:
DescriptionNotional Amount
(In millions)		Hedge Designation
Foreign currency forward contracts$333.9 Cash Flow Hedge
Foreign currency forward contracts$636.8 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 months ended April 2, 2023:
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
Foreign currency forward contracts (sales)$2.1 Total revenues$(0.9)
Foreign currency forward contracts (purchases)$— Cost of sales, excluding amortization of intangibles$0.4 
Interest rate derivatives$20.9 Interest expense, net$(5.2)
Gains and losses from designated derivative and non-derivative instruments within AOCI for the three months ended April 3, 2022 were not material.
The following table summarizes the fair value of designated and non-designated hedging instruments recognized within the unaudited Consolidated Balance Sheets as of April 2, 2023 and January 1, 2023:
(In millions)April 2, 2023January 1, 2023
Designated cash flow hedges
Interest rate derivatives:
Prepaid expenses and other current assets$11.8 $15.9 
Other liabilities$25.1 $2.1 
Foreign currency forward contracts:
Prepaid expenses and other current assets$2.7 $4.6 
Other current liabilities$11.9 $14.3 
Non-designated hedging instruments
Foreign currency forward contracts:
Prepaid expenses and other current assets$2.6 $1.5 
Other current liabilities$6.0 $5.4