Derivative Financial Instruments

12 Months Ended

Dec. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

As a result of its operating and financing activities, the Company is exposed to market risks from changes in interest and foreign currency exchange rates. These market risks may adversely affect the Company’s operating results, cash flows and financial position. The Company seeks to manage risk from changes in interest and foreign currency exchange rates through the use of derivative financial instruments. Derivative contracts are not collateralized and are entered into with large, reputable financial institutions that are monitored for counterparty risk. Refer to Note 8 for information on the fair value of our derivative instruments.

Foreign currency contracts

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company uses derivative financial instruments to manage its exposure to foreign currency exchange rate risk, specifically U.S. Dollar (“USD”) – Canadian Dollar (“CAD”) cross currency swaps and forward sales of CAD. These instruments lock in the exchange rate for a portion of the estimated cash flows of the Company’s Canadian operations. As of December 30, 2023 and December 31, 2022, cross currency swaps with notional amounts of $275.0 million were outstanding. Additionally, as of December 30, 2023 and December 31, 2022, the Company’s forward contracts had USD equivalent gross notional amounts of $33.2 million and $42.1 million, respectively.

Interest rate swap contracts

The Company’s market risk is affected by changes in interest rates. The Company’s Senior Secured Credit Facilities bear interest based on market rates plus an applicable spread. Because the interest rate on the Company’s floating-rate debt is tied to market rates, the Company manages its exposure to interest rate movements by effectively converting a portion of its floating-rate debt to fixed-rate debt. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount.

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

At December 30, 2023 and December 31, 2022, interest rate swaps with notional amounts of $275.0 million were outstanding.

The fair values of cross currency swap contracts, forward contracts and interest rate swap contracts were as follows:


(in thousands)	Balance Sheet Location	December 30, 2023		December 31, 2022
Derivatives not designated as hedging instruments:
Forward contracts	Derivative asset – current	$	—	$	237
Cross currency swaps	Derivative asset – current	—		6
Cross currency swaps	Derivative asset – non-current	20,831		22,987
Total derivatives in an asset position		$	20,831	$	23,230
Forward contracts	Accounts payable and accrued liabilities	$	384	$	14
Cross currency swaps	Accounts payable and accrued liabilities	466		66
Total derivatives in a liability position		$	850	$	80
Derivatives designated as hedging instruments:
Interest rate swaps	Derivative asset – current	$	7,691	$	8,382
Interest rate swaps	Derivative asset – non-current	2,688		8,090
Total derivatives in an asset position		$	10,379	$	16,472



Total deferred gain	Accumulated other comprehensive income	$	13,045	$	21,014

The impact of derivative financial instruments on the Consolidated Statements of Operations and Comprehensive Income were as follows:


(in thousands)	Fiscal Year
(in thousands)	2023		2022		2021
(Loss) gain on forward contracts recognized in gain (loss) on foreign currency, net	$	(373)	$	802	$	(575)
(Loss) gain on cross currency swaps recognized in gain (loss) on foreign currency, net	$	(2,770)	$	8,416	$	12,594
Gain (loss) on interest rate swaps recognized in interest expense, net	$	11,110	$	2,169	$	(214)

The table below presents the effect of cash flow hedge accounting on other comprehensive (loss) income, net of tax:


(in thousands)	Fiscal Year
(in thousands)	2023		2022		2021
Amount of gain recognized in other comprehensive (loss) income	$	3,141	$	20,678	$	1,994
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	11,110	$	2,205	$	(548)

Amounts reclassified from accumulated other comprehensive income into income are recognized in interest expense, net in the Consolidated Statements of Operations and Comprehensive Income. Within the next 12 months, the Company estimates that an additional $10.1 million of gains recognized within accumulated other comprehensive income will be reclassified as a decrease in interest expense.