General form of registration statement for all companies including face-amount certificate companies

Derivatives and Risk Management

v3.8.0.1
Derivatives and Risk Management
 9 Months Ended 12 Months Ended
Sep. 28, 2017
Dec. 29, 2016
Derivatives and Risk Management    
Derivatives and Risk Management

3. Derivatives and Risk Management

Changes in interest rates impact our results of operations. In an effort to manage our exposure to this risk, we enter into derivative contracts and may adjust our derivative portfolio as market conditions change.

Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our long‑term debt obligations, which carry variable interest rates. Market risk associated with our variable interest rate long‑term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.

In an effort to manage our exposure to the risk associated with our variable interest rate long‑term debt, we periodically enter into interest rate derivative contracts. We designate interest rate derivative contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a capped rate as cash flow hedges.

Hedge Position as of September 28, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Final Maturity

 

Other

(in thousands)

    

Notional Balance

    

Date

    

Assets

Interest rate caps (cash flow hedges)

 

$

205,000

 

U.S. dollars

 

December 2021

 

$

1,021

 

Hedge Position as of December 29, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Final Maturity

 

Other

(in thousands)

    

Notional Balance

    

Date

    

Assets

Interest rate caps (cash flow hedges)

 

$

205,000

 

U.S. dollars

 

December 2021

 

$

2,473

Interest rate swaps (cash flow hedges)

 

$

17,500

 

U.S. dollars

 

January 2017

 

$

 —

 

Designated Hedge Gains (Losses)

Gains (losses) related to our designated hedge contracts are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion Reclassified

 

 

Effective Portion Recognized in

 

 

From AOCI to Earnings

 

 

Other Comprehensive (Loss) Income

 

 

Thirteen Weeks Ended

 

 

September 28,

 

September 29,

 

September 28,

 

September 29,

(in thousands)

    

2017

    

2016

    

2017

    

2016

Interest rate caps (cash flow hedges)

 

$

 —

 

$

—

 

$

(121)

 

$

 —

Interest rate swaps (cash flow hedges)

 

$

 —

 

$

—

 

$

 —

 

$

44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion Reclassified

 

Effective Portion Recognized in

 

 

From AOCI to Earnings

 

Other Comprehensive (Loss) Income

 

 

Thirty-nine Weeks Ended

 

 

September 28,

 

September 29,

 

September 28,

 

September 29,

(in thousands)

    

2017

    

2016

    

2017

    

2016

Interest rate caps (cash flow hedges)

 

$

 —

 

$

—

 

$

(887)

 

$

 —

Interest rate swaps (cash flow hedges)

 

$

 —

 

$

 —

 

$

 —

 

$

67

 

Credit Risk

To manage credit risk associated with our interest rate hedging program, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.

The counterparties to our derivative contracts are financial institutions with investment grade credit ratings. To manage our credit risk related to our derivative financial instruments, we periodically monitor the credit risk of our counterparties, limit our exposure in the aggregate and to any single counterparty, and adjust our hedging position, as appropriate. The impact of credit risk, as well as the ability of each party to fulfill its obligations under our 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 our derivative contracts. We do not have any credit risk‑related contingent features or collateral requirements with our derivative financial instruments.

5. Derivatives and Risk Management

              Changes in interest rates impact our results of operations. In an effort to manage our exposure to this risk, we enter into derivative contracts and may adjust our derivative portfolio as market conditions change.

Interest Rate Risk

              Our exposure to market risk from adverse changes in interest rates is primarily associated with our long-term debt obligations, which carry variable interest rates. Market risk associated with our variable interest rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.

              In an effort to manage our exposure to the risk associated with our variable interest rate long-term debt, we periodically enter into interest rate contracts. We designate interest rate contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a fixed rate or capped rate as cash flow hedges.

Hedge Position as of December 29, 2016:

                                                                                                                                                                                    

(in thousands)

 

Notional Balance

 

Final Maturity
Date

 

Other
Assets

 

Other
Accrued
Liabilities

 

AOCI, Net
of Tax

 

Interest rate caps (cash flow hedges)

 

$
205,000

 

U.S. dollars

 

December 2021

 

$
2,473

 

$

—

 

$
176

 

Interest rate swaps (cash flow hedges)

 

$
17,500

 

U.S. dollars

 

January 2017

 

$

—

 

$

—

 

$

—

 

Hedge Position as of December 31, 2015:

                                                                                                                                                                                    

(in thousands)

 

Notional Balance

 

Final Maturity
Date

 

Other
Assets

 

Other
Accrued
Liabilities

 

AOCI,
Net of
Tax

 

Interest rate swaps (cash flow hedges)

 

$
35,000

 

U.S. dollars

 

January 2017

 

$

—

 

$
(160

)

$
(100

)

Designated Hedge Losses

              Gains (losses) related to our designated hedge contracts are as follows (in thousands):

                                                                                                                                                                                    

 

 

Effective Portion
Reclassified From
AOCI to Earnings

 

Effective Portion
Recognized in Other
Comprehensive Income

 

 

 

Fiscal Year Ended

 

(in thousands)

 

2014

 

2015

 

2016

 

2014

 

2015

 

2016

 

Interest rate caps (cash flow hedges)

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$
176

 

Interest rate swaps (cash flow hedges)

 

$

—

 

$

—

 

$

—

 

$
14

 

$
43

 

$
100

 

Credit Risk

              To manage credit risk associated with our interest rate hedging program, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.

              The counterparties to our derivative contracts are financial institutions with investment grade credit ratings. To manage our credit risk related to our derivative financial instruments, we periodically monitor the credit risk of our counterparties, limit our exposure in the aggregate and to any single counterparty, and adjust our hedging position, as appropriate. The impact of credit risk, as well as the ability of each party to fulfill its obligations under our 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 our derivative contracts. We do not have any credit risk-related contingent features or collateral requirements with our derivative financial instruments.