Annual report pursuant to Section 13 and 15(d)

Derivatives and Risk Management

v3.22.4
Derivatives and Risk Management
 12 Months Ended
Dec. 29, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Risk Management Derivatives and Risk Management
Interest Rate Risk
The Company’s exposure to market risk from adverse changes in interest rates is primarily associated with its long-term debt obligations, which carry variable interest rates. Market risk associated with the Company’s variable interest rate long-term debt relates to the potential negative impact to future earnings and cash flows from an increase in interest rates.
In an effort to manage exposure to the risk associated with variable interest rate long term debt, the Company periodically enters into interest rate derivative contracts. These interest rate derivative contracts are used to convert the interest rate exposure on a portion of the Company’s debt portfolio from a floating rate to a capped rate and are designated as cash flow hedges.
Derivative Position as of December 29, 2022:
in thousands Notional Balance Final Maturity
Date		 Other Current Assets Other
Assets		 AOCI, Net
of Tax
Designated as cash flow hedges:
Interest rate cap (1)
$ 75,000  U.S. dollars April 2024 $ 2,275  $ 654  $ (2,166)
Interest rate cap (1)
$ 75,000  U.S. dollars April 2024 $ 2,278  $ 656  $ (2,171)
(1)As discussed in Note 10, “Debt,” the Term Loan Facility was amended to transition from an interest rate benchmark based on LIBOR to an interest rate benchmark based on Secured Overnight Financing Rate (“SOFR”). To align with this amendment, the hedged interest rate benchmark index for the interest rate cap contracts was changed from one month LIBOR to one month Term SOFR, and the underlying hedge documentation was updated to reflect this change. As a result of the application of the practical expedients in accordance with ASC 848, Reference Rate Reform, the original hedge designation for the interest cap contracts remains intact, and the Company will continue to apply a qualitative effectiveness assessment method.
Derivative Position as of December 30, 2021:
in thousands Notional Balance Final Maturity
Date		 Other Current Assets Other
Assets		 AOCI, Net
of Tax
Designated as cash flow hedges:
Interest rate cap $ 75,000  U.S. dollars April 2024 $ 12  $ 250  $ (106)
Interest rate cap $ 75,000  U.S. dollars April 2024 $ 12  $ 250  $ (108)
Interest rate cap $ 102,500  U.S. dollars December 2021 $ —  $ —  $ (272)
Not designated as hedges:
Interest rate cap $ 102,500  U.S. dollars December 2021 $ —  $ —  $ (49)
Designated Hedge Gains
Gains related to designated hedge contracts are as follows:
Effective Portion Reclassified
From AOCI to Earnings		 Effective Portion Recognized in
Other Comprehensive Income
Fiscal Year Ended Fiscal Year Ended
(in thousands) December 29,
2022		 December 30,
2021		 December 31,
2020		 December 29,
2022		 December 30,
2021		 December 31,
2020
Interest rate caps (cash flow hedges) $ 914  $ —  $ —  $ 4,716  $ 371  $ 357 
Credit Risk
To manage credit risk associated with the Company’s interest rate hedges, the Company selects counterparties based on their credit ratings and limits exposure to any one counterparty.
The counterparties to the Company’s derivative contracts are financial institutions with investment grade credit ratings. To manage credit risk related to its derivative financial instruments, the Company periodically monitors the credit risk of its counterparties, limits its exposure in the aggregate and to any single counterparty, and adjust its hedging positions, as appropriate. The impact of credit risk, as well as the ability of each party to fulfill its obligations under the derivative financial instruments, is considered in determining the fair value of the contracts. Credit risk has not had a significant effect on the fair value of the Company’s derivative contracts. The Company’s derivative financial instruments do not have any credit risk-related contingent features or collateral requirements.