XML 26 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Hedging Transactions And Derivative Financial Instruments
 9 Months Ended
Oct. 02, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Hedging Transactions and Derivative Financial Instruments HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses cross-currency swap derivative contracts to partially hedge its net investments in foreign operations against adverse movements in exchange rates between the U.S. dollar and the euro. The cross-currency swap derivative contracts are agreements to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. On September 20, 2019, the Company entered into cross-currency swap derivative contracts with respect to its $650.0 million senior unsecured term loan facility. These contracts effectively convert the $650.0 million senior unsecured term loan facility to an obligation denominated in euros and partially offsets the impact of changes in currency rates on foreign currency denominated net investments. The changes in the fair value of these instruments are recorded in accumulated other comprehensive loss in equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive loss as reflected in Note 15. Any ineffective portions of net investment hedges are reclassified from accumulated other comprehensive loss into income during the period of change. The interest income or expense from these swaps is recorded in interest expense in the Company’s Condensed Consolidated and Combined Statements of Operations consistent with the classification of interest expense attributable to the underlying debt. These instruments mature on dates ranging from June 2021 to September 2022.

The Company also has foreign currency denominated long-term debt in the amount of €600.0 million. This senior unsecured term loan facility represents a partial hedge of the Company’s net investment in foreign operations against adverse movements in exchange rates between the U.S. dollar and the euro. The euro senior unsecured term loan facility is designated and qualifies as a non-derivative hedging instrument. Accordingly, the foreign currency translation of the euro senior unsecured term loan facility is recorded in accumulated other comprehensive loss in equity in the accompanying Condensed Consolidated Balance Sheets, offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive loss (see Note 15). Any ineffective portions of net investment hedges are reclassified from accumulated other comprehensive loss into income during the period of change. The euro senior unsecured term loan facility matures in September 2022. Refer to Note 13 for a further discussion of the above noted loan facilities.

The Company uses interest rate swap derivative contracts to reduce its variability of cash flows related to interest payments with respect to its senior unsecured term loans. The interest rate swap contracts exchange interest payments based on variable rates for interest payments based on fixed rates. The changes in the fair value of these instruments are recorded in accumulated other comprehensive loss in equity (see Note 15). Any ineffective portions of the cash flow hedges are reclassified from accumulated other comprehensive loss into income during the period of change. The interest income or expense from these swaps is recorded in interest expense in the Company’s Condensed Consolidated and Combined Statements of Operations consistent with the classification of interest expense attributable to the underlying debt. These instruments mature on dates ranging from September 2021 to September 2022.
The following table summarizes the notional values as of October 2, 2020 and September 27, 2019 and pretax impact of changes in the fair values of instruments designated as net investment hedges and cash flow hedges in accumulated other comprehensive loss (“OCI”) for the three and nine months ended October 2, 2020 and September 27, 2019 ($ in millions):

Notional Amount(Loss) Gain Recognized in OCI
Three Months Ended October 2, 2020
Interest rate contracts$450.0 $1.9 
Foreign currency contracts650.0 (30.7)
Foreign currency denominated debt703.0 (28.1)
Total$1,803.0 $(56.9)

Notional Amount(Loss) Gain Recognized in OCI
Nine Months Ended October 2, 2020
Interest rate contracts$450.0 $(9.8)
Foreign currency contracts650.0 (20.9)
Foreign currency denominated debt703.0 (30.1)
Total$1,803.0 $(60.8)

Notional Amount(Loss) Gain Recognized in OCI
Three and Nine Months Ended September 27, 2019
Interest rate contracts$650.0 $(0.7)
Foreign currency contracts650.0 5.7 
Foreign currency denominated debt656.5 7.2 
Total$1,956.5 $12.2 

The Company did not reclassify any deferred gains or losses related to net investment and cash flow hedges from accumulated other comprehensive loss to income during the three and nine months ended October 2, 2020 and September 27, 2019. In addition, the Company did not have any ineffectiveness related to net investment and cash flow hedges during the three and nine months ended October 2, 2020 and September 27, 2019. The cash inflows and outflows associated with the Company’s derivative contracts designated as net investment hedges are classified in investing activities in the accompanying Condensed Consolidated and Combined Statements of Cash Flows.

The Company’s derivative instruments, as well as its non-derivative debt instruments designated and qualifying as net investment hedges, were classified in the Company’s Condensed Consolidated Balance Sheets as follows ($ in millions):

October 2, 2020December 31, 2019
Derivative assets:
Prepaid expenses and other current assets$— $0.1 
Derivative liabilities:
Accrued expense and other liabilities$24.0 $8.9 
Other long-term liabilities$15.6 $— 
Non-derivative hedging instruments:
Long-term debt$703.0 $672.9