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Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 29, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities

Interest Rate Risk - The Company manages economic risks, including interest rate variability, primarily by managing the amount, sources and duration of its debt funding and through the use of derivative financial instruments. The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps.
DESIGNATED HEDGES
Cash Flow Hedges of Interest Rate Risk - On September 9, 2014, the Company entered into variable-to-fixed interest rate swap agreements with eight counterparties to hedge a portion of the cash flows of the Company’s variable rate debt (the “2014 Swap Agreements”). The 2014 Swap Agreements had an aggregate notional amount of $400.0 million and matured on May 16, 2019. Under the terms of the 2014 Swap Agreements, the Company paid a weighted-average fixed rate of 2.02% on the notional amount and received payments from the counterparties based on the 30-day LIBOR rate.

On October 24, 2018 and October 25, 2018, the Company entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of the Company’s variable rate debt (the “2018 Swap Agreements”). The 2018 Swap Agreements have an aggregate notional amount of $550.0 million, a start date of May 16, 2019 (the maturity date of the 2014 Swap Agreements), and mature on November 30, 2022. Under the terms of the 2018 Swap Agreements, the Company pays a weighted-average fixed rate of 3.04% on the notional amount and receives payments from the counterparties based on the one-month LIBOR rate.

The Company’s swap agreements have been designated and qualify as cash flow hedges, are recognized on its Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. The Company estimates $7.9 million will be reclassified to interest expense over the next 12 months related to the 2018 Swap Agreements.

The following table presents the fair value of the Company’s interest rate swaps as well as their classification on the Company’s Consolidated Balance Sheets as of the periods indicated:
(dollars in thousands)
DECEMBER 29,
2019
 
DECEMBER 30,
2018
 
CONSOLIDATED BALANCE SHEET CLASSIFICATION
Interest rate swaps - asset (1)
$
—

 
$
765

 
Other current assets, net
 
 
 
 
 
 
Interest rate swaps - liability
$
7,174

 
$
1,393

 
Accrued and other current liabilities
Interest rate swaps - liability
16,835

 
9,723

 
Other long-term liabilities, net
Total fair value of derivative instruments - liabilities (1)
$
24,009

 
$
11,116

 
 
 
 
 
 
 
 
Interest receivable
$
—

 
$
112

 
Other current assets, net
Accrued interest
$
632

 
$
—

 
Accrued and other current liabilities
____________________
(1)    See Note 18 - Fair Value Measurements for fair value discussion of the interest rate swaps.

The following table summarizes the effects of the swap agreements on Net income for the periods indicated:
 
FISCAL YEAR
(dollars in thousands)
2019
 
2018
 
2017
Interest rate swap expense recognized in Interest expense, net
$
(2,436
)
 
$
(161
)
 
$
(3,908
)
Income tax benefit recognized in Provision (benefit) for income taxes
631

 
41

 
1,527

Total effects of the interest rate swaps on Net income
$
(1,805
)
 
$
(120
)
 
$
(2,381
)


The Company records its derivatives on its Consolidated Balance Sheets on a gross balance basis. The Company’s interest rate swaps are subject to master netting arrangements. As of December 29, 2019, the Company did not have more than one derivative between the same counterparties and as such, there was no netting.

By utilizing the interest rate swaps, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of December 29, 2019 and December 30, 2018, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness.

As of December 29, 2019 and December 30, 2018, the fair value of the Company’s interest rate swaps was in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, of $24.8 million and $10.5 million, respectively. As of December 29, 2019 and December 30, 2018, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of December 29, 2019 and December 30, 2018, it could have been required to settle its obligations under the agreements at their termination value of $24.8 million and $10.5 million, respectively.