Financial Instruments

12 Months Ended

Dec. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

9. Financial Instruments

We do not enter into financial instruments for trading or speculative purposes. We principally use financial instruments to reduce the impact of changes in foreign currency exchange rates and commodities used as raw materials in our products. The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts. Derivative financial instruments are recorded at fair value. The counterparties to derivative contracts are major financial institutions. We are subject to credit risk on these contracts equal to the fair value of these instruments. Management currently believes that the risk of incurring material losses is unlikely and that the losses, if any, would be immaterial to the Company.

Raw materials used by the Company are subject to price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors. As a result, from time to time, we enter into commodity swaps to manage the price risk associated with forecasted purchases of materials used in our operations. We account for these commodity derivatives as economic hedges or cash flow hedges. Changes in the fair value of economic hedges are recorded directly into current period earnings. The gross notional amount of all commodity derivatives outstanding at December 30, 2023 was $0.3 million, representing a net settlement liability of zero. The gross notional amount of all commodity derivatives outstanding at December 31, 2022 was $17.8 million, representing a net settlement liability of $3.6 million.

We may enter into foreign currency forward contracts to protect against foreign exchange risks associated with certain existing assets and liabilities, forecasted future cash flows, and net investments in foreign subsidiaries. Foreign exchange contracts related to forecasted future cash flows correspond to the periods of the forecasted transactions, which generally do not exceed 12 to 15 months subsequent to the latest balance sheet date.

We may be exposed to interest rate risk on existing debt or forecasted debt issuance. To mitigate this risk, we may enter into interest rate hedge contracts. The Company entered into a total of $600 million of interest rate hedge contracts during the fourth quarter of 2021 and first quarter of 2022. These contracts were terminated during the second quarter of 2023 in parallel with the issuance of $600 million of long-term debt. Terminating the contracts resulted in a pre-tax gain of $84.2 million which was recorded in accumulated other comprehensive income and will be reclassified to earnings over the 10-year maturity associated with the new long-term debt.

For derivative instruments that are designated as fair value hedges, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item, are recognized on the same line of the consolidated statements of income. The changes in the fair value of cash flow hedges are reported in OCI and are recognized in the consolidated statements of income when the hedged item affects earnings. The changes in fair value for net investment hedges are recognized in the consolidated statements of income when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity. In addition, changes in the fair value of all economic hedge transactions are immediately recognized in current period earnings. Our primary foreign currency hedge contracts pertain to the Canadian dollar, the British pound, the Mexican peso, the Chinese yuan and the South African rand. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at December 30, 2023 was $481.9 million, representing a net settlement liability of $1.9 million. Based on foreign exchange rates as of December 30, 2023, we estimate that $9.9 million of net derivative gains included in accumulated other comprehensive income as of December 30, 2023 will be reclassified to earnings within the next twelve months.

The fair values of foreign exchange and commodity derivative instruments on the consolidated balance sheets as of December 30, 2023 and December 31, 2022 were:

		Fair Value
(In millions)	Location	2023		2022
Assets:
Foreign exchange contracts	Other current assets	$	0.8	$	5.0
Interest rate contracts	Other current assets		—		84.6
	Total assets	$	0.8	$	89.6
Liabilities:
Foreign exchange contracts	Other current liabilities	$	2.7	$	0.7
Commodity contracts	Other current liabilities		—		3.6
	Total liabilities	$	2.7	$	4.3

The effects of derivative financial instruments on the consolidated statements of income in 2023, 2022 and 2021 were:

(In millions)	Classification and Amount of Gain (Loss)    Recognized in Income on Fair Value and    Cash Flow Hedging Relationships
	2023
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Income	$	2,714.8		$	116.5	$	19.5
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		2.0
Derivative designated as hedging instruments		—			—		(0.4	)
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		5.2			—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.2	)		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			9.0		—
(In millions)	Classification and Amount of Gain (Loss)    Recognized in Income on Fair Value and    Cash Flow Hedging Relationships
	2022
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Income	$	2,790.1		$	119.2	$	12.0
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		(22.4	)
Derivative designated as hedging instruments		—			—		21.3
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		4.8			—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(7.3	)		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			3.6		—

(In millions)	Classification and Amount of Gain (Loss)    Recognized in Income on Fair Value and    Cash Flow Hedging Relationships
	2021
	Cost of products sold			Interest expense		Other expense, net
Total amounts per Consolidated Statements of Income	$	2,840.6		$	84.3	$	0.4
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		(4.7	)
Derivative designated as hedging instruments		—			—		2.1
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(2.6	)		—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		1.3			—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			0.6		—

The cash flow hedges from continuing operations recognized in other comprehensive income were net gains of $4.1 million, $119.0 million and $1.0 million in 2023, 2022 and 2021 respectively.