Derivatives and Financial Instruments

We are exposed to the impact of changes in interest rates in the normal course of business. Our financial risk management program is designed to manage the exposure arising from cash flow variability and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes.

In July and August 2019, we executed interest rate swap contracts with two-year terms and notional amounts aggregating $500 million that are designated as cash flow hedges to manage interest rate risk on our floating rate debt. These interest rate swap contracts adjust the amount of our total debt that is subject to variable interest rates by effectively fixing the borrowing rates on our floating rate debt discussed in Note 11 - Debt.

The following table discloses the fair value and balance sheet location of our derivative instruments:



	Liability Derivatives
(In millions)	Balance Sheet Location	September 30, 2019		December 29, 2018
Cash Flow Hedging Instruments:
Interest rate swap contracts	Other liabilities	$	2	$	—

We test the effectiveness of interest rate hedges quarterly by applying a hypothetical derivative method using regression analysis.

Since our hedging contracts are deemed highly effective as of September 30, 2019, hedge gains and losses were initially reported as a component of other comprehensive income and subsequently recorded in the consolidated statement of operations when the hedged exposure was recognized. The effect of cash flow hedges on Other comprehensive (loss) income was as follows:



	Amount of Loss
(In millions)	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Cash Flow Hedging Instruments:
Losses recognized in Other comprehensive (loss) income	$	(2	)	$	(2	)

During the three months ended September 30, 2019, immaterial gains were reclassified out of Other comprehensive (loss) income into Interest expense within the consolidated statement of operations. The net amount of deferred gains on cash flow hedges that are expected to be reclassified from AOCI into Interest expense within the next twelve months is not material.