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Derivative Financial Instruments | 9 Months Ended
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Sep. 29, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Our derivative financial instruments reduce our exposure to fluctuations in foreign exchange rates and variable interest rates. We designate our derivative financial instruments as cash flow hedges. Counterparties expose us to credit loss in the event of non-performance of hedges. We monitor our exposure to counterparty non-performance risk both at inception of the hedge and at least quarterly thereafter. Fluctuations in the value of the derivative instruments are generally offset by changes in the cash flows of the underlying exposures being hedged. A cash flow hedge requires that the change in the fair value of a derivative instrument be recognized in other comprehensive income, a component of shareholders’ equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. Certain of our derivative instruments contain provisions that require the current credit relationship between us and our counterparty to be maintained throughout the term of the derivative instruments. If that credit relationship changes, certain provisions could be triggered, and the counterparty could request immediate collateralization of derivative instruments in a net liability position above a certain threshold. The aggregate fair value of all derivative instruments with a credit-risk-related contingent feature that are in a liability position on September 29, 2023 is $2.6 million. As of September 29, 2023, no triggering event has occurred and thus we are not required to post collateral. Derivative instruments are disclosed on a gross basis. There are various rights of setoff associated with our derivative instruments that are subject to an enforceable master netting arrangement or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties, individually, these financial rights are not material. 13. Derivative Financial Instruments (continued) Cash flows from derivative instruments that are designated as cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows related to changes in fair value subsequent to the date of discontinuance are classified within investing activities. Foreign Currency Hedges Our results of operations and financial condition are exposed to fluctuations in currency exchange rates against the U.S. dollar, and we mitigate that exposure by entering into foreign currency forward contracts. Certain of our subsidiaries periodically enter into foreign currency forward contracts in order to hedge portions of forecasted sales or cost of sales denominated in foreign currencies, which generally mature within one year. At September 29, 2023, our foreign currency forward contracts hedge a portion of our 2023 foreign currency exposure. The foreign currency forward contracts qualifying as cash flow hedges were designated as single-purpose cash flow hedges of forecasted cash flows. We had the following outstanding foreign currency forward contracts as of September 29, 2023 (in millions):
Foreign currency contracts qualifying as cash flow hedges: |  | Notional amount |  |  |  |  |  |
Euro |  | EUR |  | 73.4 |  |  |  |  |  |  |  |  |
British pound |  | GBP |  | 9.1 |  |  |  |  |  |  |  |  |
Japanese yen |  | JPY |  | 297.8 |  |  |  |  |  |  |  |  |
Chilean peso |  | CLP |  | 6,876.0 |  |  |  |  |  |  |  |  |
Kenyan shilling |  | KES |  | 982.4 |  |  |  |  |  |  |  |  |
Korean won |  | KRW |  | 4,100.0 |  |  |  |  |  |  |  |  |
Interest Rate Contracts Our results of operations and financial condition are exposed to fluctuations in variable interest rates, and we mitigate that exposure by entering into interest rate swaps. During 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings through 2028. We amended our Second A&R Credit Agreement and our interest rate swaps to transition from LIBOR to SOFR as a reference rate effective January 3, 2023. Refer to our discussion of New Accounting Pronouncements in Note 2, “Recently Issued Accounting Pronouncements” for further information. Gains or losses on interest rate swaps are recorded in other comprehensive income and are subsequently reclassified into earnings as the interest expense on debt is recognized in earnings. At September 29, 2023, the notional value of interest rate contracts outstanding was $400.0 million, with $200.0 million maturing in June 2024 and the remaining $200.0 million maturing in 2028. Refer to Note 8, “Debt and Finance Lease Obligations.” 13. Derivative Financial Instruments (continued) The following table reflects the fair values of derivative instruments, which are designated as level 2 in the fair value hierarchy, as of September 29, 2023 and December 30, 2022 (U.S. dollars in millions):
| Derivatives designated as hedging instruments (1) |
| Foreign exchange contracts |  |  | Interest rate swaps |  | Total |
Balance Sheet location: | September 29, 2023 |  | December 30, 2022 |  |  |  |  | September 29, 2023 |  | December 30, 2022 |  | September 29, 2023 |  | December 30, 2022 |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prepaid expenses and other current assets | $ | 3.7 |  |  | $ | — |  |  |  |  |  | $ | 3.6 |  |  | $ | — |  |  | $ | 7.3 |  |  | $ | — |  |
Other noncurrent assets | — |  |  | — |  |  |  |  |  | 12.8 |  |  | 15.8 |  |  | 12.8 |  |  | 15.8 |  |
Total asset derivatives | $ | 3.7 |  |  | $ | — |  |  |  |  |  | $ | 16.4 |  |  | $ | 15.8 |  |  | $ | 20.1 |  |  | $ | 15.8 |  |
Liability derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses | $ | 2.6 |  |  | $ | 6.5 |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 2.6 |  |  | $ | 6.5 |  |
Other noncurrent liabilities | — |  |  | 0.2 |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 0.2 |  |
Total liability derivatives | $ | 2.6 |  |  | $ | 6.7 |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 2.6 |  |  | $ | 6.7 |  |
(1) See Note 14, “Fair Value Measurements,” for fair value disclosures. |
We expect that $7.8 million of the net fair value of our cash flow hedges recognized as a net gain in accumulated other comprehensive loss will be transferred to earnings during the next 12 months, and the remaining net gain of $7.9 million over the following 5 years, along with the earnings effect of the related forecasted transactions. The following table reflects the effect of derivative instruments on the Consolidated Statements of Comprehensive Income for the quarters and nine months ended September 29, 2023 and September 30, 2022 (U.S. dollars in millions):
|  | Net amount of gain (loss) recognized in other comprehensive income (loss) on derivatives
|  | Quarter ended |  | Nine months ended
Derivative instruments |  | September 29, 2023 |  | September 30, 2022 |  | September 29, 2023 |  | September 30, 2022
Foreign exchange contracts |  | $ | 2.5 |  |  | $ | (2.6) |  |  | $ | 7.0 |  |  | $ | 17.2 |
Interest rate swaps, net of tax |  | 2.3 |  |  | 14.2 |  |  | 2.1 |  |  | 38.8 |
Total |  | $ | 4.8 |  |  | $ | 11.6 |  |  | $ | 9.1 |  |  | $ | 56.0 |
Refer to Note 15, “Accumulated Other Comprehensive Loss,” for the effect of derivative instruments on the Consolidated Statements of Operations related to amounts reclassified from accumulated other comprehensive loss for the quarters and nine months ended September 29, 2023 and September 30, 2022.

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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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