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.

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.

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.

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

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.”

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.