The Company selectively uses derivative and non-derivative instruments to manage market risk associated with changes in interest rates and foreign currency exchange rates. The use of derivatives is intended for hedging purposes only, and the Company does not enter into derivative transactions for speculative purposes. The Company’s derivative contracts do not require cash collateral.

The Company’s interest rate risk relates primarily to interest rate exposures on variable rate debt including the Senior Secured Credit Facilities. Refer to Note 7–Borrowings for additional information on the currently outstanding components of the Senior Secured Credit Facilities. The Company entered into a series of interest rate cap and swap agreements to hedge the related risk of the variability to the Company’s cash flows due to the rates specified for these credit facilities.

The Company designates certain interest rate derivative instruments as cash flow hedges, including a portion of the outstanding interest rate swaps. The Company records gains and losses due to changes in fair value of the derivatives within Other comprehensive income (loss) (“OCI”) and reclassifies these amounts to Interest expense, net in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the hedge is prospectively de-designated. The pre-tax unrealized gain of $1.1 million within OCI as of April 3, 2022 is expected to be reclassified to earnings in the next 12 months.

The following tables summarize the Company’s interest rate derivative agreements as of April 3, 2022:


Effective date	Expiration date	Interest rate cap amount	Notional amount (a)		Hedge designation
December 31, 2020	December 31, 2023	3.5%	$	1,000.0	Non-designated

Effective date

Expiration date

Description

Fixed rate

Floating rate

Notional amount(a)

Hedge designation

September 27,
2019

December 31,
2023

Pay fixed,
receive float

1.635%

1-month LIBOR rate

1,000.0

Cash Flow
Hedge

(a)

The notional value of this instrument is expected to be $500.0 million in fiscal 2023.

The Company previously entered into an interest rate cap that was designated as a cash flow hedge. During the fiscal quarter ended September 29, 2019, the Company de-designated its 3.5% interest rate caps upon entering into the interest rate swap agreement that hedges a portion of the Company’s borrowings under the Senior Secured Credit Facilities. Upon de-designation, the Company began prospectively recognizing mark-to-market gains and losses within Other expense, net on the interest rate caps. The remaining loss on the interest rate caps that was deferred in Accumulated other comprehensive income (loss) (“AOCI”) was amortized to Interest expense, net until the Company concluded that a portion of the interest on the Company’s previously hedged borrowings was no longer probable of being paid due to the pay down of a portion of the borrowings using proceeds from the IPO. Accordingly, $0.6 million of losses that had previously been deferred within AOCI were released into Interest expense, net during the fiscal quarter ended April 4, 2021. During the fiscal quarter ended April 3, 2022, the Company reclassified $0.9 million of deferred losses from AOCI to Interest expense, net. As of April 3, 2022 and January 2, 2022, the remaining balance of the deferred loss in AOCI was $4.7 million and $5.6 million, respectively.

In February 2021, the Company concluded that a portion of the interest on the Company’s previously hedged borrowings related to the interest rate swap was no longer probable of being paid due to the pay down of a portion of the borrowings using the proceeds from the IPO. Due to this reduction in the hedged borrowings, the Company de-designated the hedging relationship, and contemporaneously re-designated the remaining borrowings. Accordingly, $3.1 million of losses that had previously been deferred within AOCI were released into Interest expense, net during the fiscal quarter ended April 4, 2021. As of April 3, 2022 and January 2, 2022, the remaining balance of the deferred gain and deferred loss in AOCI was $6.7 million and $13.9 million, respectively.

The Company has currency risk exposures relating primarily to foreign currency denominated monetary assets and liabilities and forecasted foreign currency denominated intercompany and third-party transactions. The Company uses foreign currency forward, option contracts and cross currency swaps to manage its currency risk exposures. The Company’s foreign currency forward contracts are denominated primarily in Australian Dollar, Brazilian Real, British Pound, Canadian Dollar, Chilean Peso, Chinese Yuan/Renminbi, Colombian Peso, Euro, Indian Rupee, Japanese Yen, Mexican Peso, Philippine Peso, Singapore Dollar, Swiss Franc and the Thai Baht.

The Company designates certain foreign currency forward contracts as cash flow hedges. The Company records gains and losses due to changes in fair value of the derivatives within OCI and reclassifies these amounts to Cost of revenue, excluding amortization of intangible assets in the same period or periods for which the underlying hedged transaction affects earnings. In the event the Company determines the hedged transaction is no longer probable to occur or concludes the hedge relationship is no longer effective, the hedge is de-designated prospectively. The pre-tax unrealized loss of $1.1 million within OCI as of April 3, 2022 is expected to be reclassified to earnings in the next 12 months.

Foreign exchange risk is also managed through the use of foreign currency debt. During the fiscal quarter ended April 3, 2022, €260.0 million ($287.1 million) of the Company's senior secured Euro Term Loan Facility has been designated as, and is effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the Euro-denominated debt instruments are included in foreign currency translation adjustments within AOCI. In April 2022, the Company de-designated the net investment hedge.

The Company also enters into foreign currency forward contracts that are not part of designated hedging relationships, which are intended to mitigate exchange rate risk of monetary assets and liabilities and related forecasted transactions. The Company records these non-designated derivatives at mark-to-market with gains and losses recognized currently in earnings within Other expense, net.

Concurrent with the issuance of the 2028 Notes, the Company entered into U.S. Dollar to Japanese Yen cross currency swaps for total notional of $350.0 million at a weighted average interest rate of 5.56%, with a five-year term to lower interest expense on the 2028 Notes. These cross currency swaps were not designated for hedge accounting, and consequently, changes in their fair value were recorded to Other expense, net.

The Company terminated the cross currency swaps on April 1, 2021 and received $12.8 million of cash from net settlement subsequent to April 4, 2021.

Gains and losses from designated derivative and non-derivative instruments within AOCI during the fiscal quarter ended April 3, 2022 and April 4, 2021 were recorded as follows:


Designated Hedging Instruments	Amount of loss (gain) recognized in OCI on hedges			Location of amounts reclassified from AOCI into income	Amount of loss (gain) reclassified from AOCI into income
Fiscal Quarter Ended April 3, 2022
Cash flow hedges:
Foreign currency forward contracts	$	1.5		Cost of revenue, excluding amortization of intangible assets	$	(1.3	)
Interest rate derivative contracts		(16.8	)	Interest expense, net		4.6
Net investment hedges:
Foreign currency-denominated debt(a)		(8.9	)	N/A	N/A
Fiscal Quarter Ended April 4, 2021
Cash flow hedges:
Foreign currency forward contracts	$	(3.5	)	Cost of revenue, excluding amortization of intangible assets	$	0.1
Interest rate derivative contracts		(3.3	)	Interest expense, net		9.1

(a)

The amount of loss (gain) recognized in OCI for the foreign-currency denominated debt is presented within the CTA component of OCI. These gains and losses will remain in CTA until the related hedged item affects earnings, which would occur upon disposal or complete or substantial liquidation of the underlying hedged entities.

The following tables present the effect of the Company’s designated derivative instruments within Interest expense, net and Cost of revenue, excluding amortization of intangible assets in the unaudited consolidated statements of operations:


	Fiscal Quarter Ended April 3, 2022					Fiscal Quarter Ended April 4, 2021
	Interest expense, net		Cost of revenue, excluding amortization of intangible assets				Interest expense, net		Cost of revenue, excluding amortization of intangible assets
Total amount of line item in unaudited consolidated statements of operations where effects of hedges are presented:	$	32.5	$	249.5			$	43.4	$	248.2
Effects of cash flow hedging relationships
Loss (Gain) on cash flow hedging relationships
Foreign currency forward contracts:
Amount of loss (gain) reclassified from AOCI into income	N/A		$	(1.3	)		N/A		$	0.1
Amount reclassified from AOCI into income due to forecast transaction that is no longer probable of occurring	N/A		$	—			N/A		$	—
Interest rate derivative contracts:
Amount of net loss reclassified from AOCI into income	$	4.6	N/A				$	9.1	N/A
Amount reclassified from AOCI into income due to a forecast transaction that is no longer probable of occurring (a)	$	—	N/A				$	3.7	N/A

(a) The amount is included within the total amount of loss (gain) reclassified from AOCI into income.

Fair value (gains) and losses of derivative contracts, as determined using Level 2 inputs, that do not qualify for hedge accounting treatment are recorded in other expense, net and were as follows:


	Fiscal Quarter Ended
	April 3, 2022			April 4, 2021
Interest rate cap derivatives	$	(1.9	)	$	0.2
Foreign currency derivatives		8.3			30.4
Cross currency swaps		—			(24.0	)

The following table presents the location and fair values of designated hedging instruments recognized within the unaudited consolidated balance sheets. The fair values of designated hedging instruments have been determined using Level 2 inputs.


	April 3, 2022		January 2, 2022
Interest rate derivatives:
Other assets	$	6.7	$	—
Other liabilities		—		13.9
Foreign currency forward contracts:
Other current assets		7.6		4.5
Accrued liabilities		8.7		4.3

The following table presents the location and fair values of non-designated hedging instruments recognized within the unaudited consolidated balance sheets. The fair values of non-designated hedging instruments have been determined using Level 2 inputs.


	April 3, 2022		January 2, 2022
Interest rate derivatives:
Other liabilities	$	2.4	$	5.2
Foreign currency forward contracts:
Other current assets		0.6		0.9
Accrued liabilities		3.7		1.1