Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure

The Company is exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates. One objective of the Company's risk management program is to mitigate these risks using derivative instruments.

Cash Flow Hedges - Interest Rate Swap Contract

In July 2022, the Company entered into a floating-to-fixed swap agreement on its variable rate debt under the Term Loan Facility. The interest rate swap was designated specifically to the Term Loan Facility and qualifies as a cash flow hedge. The notional amount is scheduled to decrease quarterly and will expire on December 30, 2025. As cash flow hedges, unrealized gains are recognized as assets and unrealized losses are recognized as liabilities. Unrealized gains and losses are designated as effective or ineffective based on a comparison of the changes in fair value of the interest rate swaps and changes in fair value of the underlying exposures being hedged. The effective portion is recorded as a component of accumulated other comprehensive income (loss) and will be reflected in earnings during the period the hedged transaction effects earnings, while the ineffective portion is recorded as a component of interest expense.

Foreign Currency Contracts Not Designated as Hedges

The Company enters into foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting. The Company recognizes the change in fair value of its foreign currency forward contracts in the condensed consolidated statement of operations.

The notional amounts of our derivative instruments are as follows:

(In thousands)	September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate swap contract - cash flow hedge	$	1,650,000	$	1,950,000
Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars	$	—	$	3,995
Foreign exchange contracts to sell U.S. dollars	—		26,225

The fair values of our derivative instruments included in the condensed consolidated balance sheets are as follows:

(In thousands)	Derivative Assets				Derivative Liabilities
Condensed Consolidated Balance Sheet Location	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments - Interest rate swap contract -cash flow hedge
Other current assets	$	31,827	$	32,481	$	—	$	—
Other assets - long-term	11,806		14,108		—		—
Derivatives not designated as hedging instruments -Foreign exchange contracts
Other current assets	$	—	726		$	—	$	—
Other accrued liabilities	—		—		—		193

The following table summarizes the effects of our derivative instruments on our condensed consolidated statements of operations:

		(Gain) Loss Recognized in Condensed Consolidated Statements of Income
(In thousands)	Condensed Consolidated Statements of Operations Location	Three months ended				Nine months ended
Derivatives designated as hedging instruments:		September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Interest rate swap contract-cash flow hedge	Interest expense, net	$	(9,530)	$	—	$	(27,081)	$	—
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other expense, net	$	—	$	562	$	(374)	$	562

The following table summarizes the effects of our derivative instruments on Accumulated Other Comprehensive Income:

	Gain (Loss) recognized in Other Comprehensive Income (Loss)
(In thousands)	Three months ended				Nine months ended
Derivatives designated as hedging instruments:	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Interest rate swap contract - Cash flow hedge	$	(2,050)	$	30,743	$	(2,289)	$	30,743

We expect approximately $31.8 million to be reclassified from accumulated other comprehensive income into interest expense, net during the next twelve months related to our interest rate swap based on projected rates of the SOFR forward curve as of September 30, 2023.