Financial Instruments and Risk Management (Notes)

6 Months Ended

Jun. 29, 2024

Investments, All Other Investments [Abstract]

Financial Instruments and Risk Management

DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes foreign currency forward exchange contracts designated as cash flow hedges to manage the volatility associated primarily with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business. These foreign currency forward exchange hedge contracts extended out to a maximum of 503 days, 531 days, and 524 days as of June 29, 2024, December 30, 2023 and July 1, 2023, respectively. If, in the future, the foreign exchange contracts are determined not to be highly effective or are terminated before their contractual termination dates, the Company would remove the hedge designation from those contracts and reclassify into earnings the unrealized gains or losses that would otherwise be included in accumulated other comprehensive income (loss) within stockholders’ equity.

The Company also utilizes foreign currency forward exchange contracts that are not designated as hedging instruments to manage foreign currency transaction exposure. Foreign currency derivatives not designated as hedging instruments are offset by foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities.

The Company has an interest rate swap arrangement, which unless otherwise terminated, will mature on May 30, 2025. This agreement, which exchanges floating rate interest payments for fixed rate interest payments over the life of the agreement without the exchange of the underlying notional amounts, has been designated as a cash flow hedge of the underlying debt. The notional amount of the interest rate swap arrangement is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap arrangement is recognized as interest expense, net. In accordance with FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, the Company has formally documented the relationship between the interest rate swap and the variable rate borrowing, as well as its risk management objective and strategy for undertaking the hedge transactions. This process included linking the derivative to the specific liability or asset on the balance sheet. The Company also assessed at the inception of the hedge, and continues to assess on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in the cash flows of the hedged item.

The notional amounts of the Company’s derivative instruments are as follows:

(Dollars in millions)	June 29, 2024		December 30, 2023		July 1, 2023
Foreign exchange hedge contracts	$	257.9	$	269.0	$	295.0
Interest rate swap	41.1		75.3		119.9

The recorded fair values of the Company’s derivative instruments are as follows:

(In millions)	June 29, 2024		December 30, 2023		July 1, 2023
Financial assets:
Foreign exchange hedge contracts	$	3.2	$	—	$	1.6
Interest rate swap	0.8		1.8		3.9
Financial liabilities:
Foreign exchange hedge contracts	$	(1.0)	$	(5.1)	$	(4.7)

Foreign exchange hedge contract financial assets are recorded to prepaid expenses and other current assets and financial liabilities are recorded to other accrued liabilities on the consolidated balance sheets. Interest rate swap financial assets are recorded to other assets and financial liabilities are recorded to other liabilities on the consolidated condensed balance sheets.