Derivative Financial Instruments

3 Months Ended

Mar. 29, 2025

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 foreign currency exchange rates and interest 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 foreign currency exchange rates through the use of forward contracts or cross currency swaps or both, and from time to time, may use interest rate swaps to manage the risk of changes in interest rates. The Company’s forward contracts are not collateralized and are entered into with large, reputable financial institutions that are monitored for counterparty risk. Refer to Note 5. Fair Value Measurements for information on the fair value of our derivative financial 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 forward contracts to manage its exposure to fluctuations in the U.S. dollar (“USD”) – Canadian dollar (“CAD”) and may also use cross currency swaps for the same reason. Forward contracts lock in the exchange rate for a portion of the estimated cash flows of the Company’s Canadian operations. As of March 29, 2025 and December 28, 2024, the Company’s forward contracts had USD equivalent notional amounts of $103.9 million and $102.5 million, respectively. In April 2024, the Company terminated its cross currency swaps, resulting in net proceeds of $28.1 million. These cross currency swaps were not designated in hedging relationships.

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 margin. Because the interest rate on the Company’s floating-rate debt is tied to market rates, the Company may from time to time manage its exposure to interest rate movements by effectively converting a portion of its floating-rate debt to fixed-rate debt using interest rate swaps. Interest rate swaps, as used by the Company, 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 previously entered into two interest rate swaps that were designated as cash flow hedges. In April 2024, the Company terminated its interest rate swaps, resulting in net proceeds of $10.3 million. All amounts deferred into accumulated other comprehensive income prior to termination will be amortized to interest expense through May 2025, being the original maturity date of the interest rate swaps.

The fair value of forward contracts were as follows:


(in thousands)	Balance Sheet Location	March 29, 2025		December 28, 2024
Forward contracts not designated as hedging instruments	Derivative asset – current	$	3,045	$	4,574

The impact of derivative financial instruments on the unaudited interim Condensed Consolidated Statements of Operations and Comprehensive Loss was as follows:


	Thirteen Weeks Ended
(in thousands)	March 29, 2025		March 30, 2024
Loss (gain) on forward contracts recognized in (gain) loss on foreign currency, net	$	345	$	(271)
Gain on cross currency swaps recognized in (gain) loss on foreign currency, net	$	—	$	(5,614)
Gain on interest rate swaps recognized in interest expense, net	$	(2,636)	$	(3,024)

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


	Thirteen Weeks Ended
(in thousands)	March 29, 2025		March 30, 2024
Gain recognized in other comprehensive loss	$	—	$	2,199
Gain reclassified from accumulated other comprehensive income into net loss	$	2,636	$	3,024

As of March 29, 2025 and December 28, 2024, the Company’s total deferred gain in accumulated other comprehensive income in the unaudited interim Condensed Consolidated Balance Sheets was $1.8 million and $4.4 million, respectively. Amounts reclassified from accumulated other comprehensive income into net loss are recognized in interest expense, net in the unaudited interim Condensed Consolidated Statements of Operations and Comprehensive Loss. Within the next 12 months, the Company estimates that an additional $1.8 million of gains recognized within accumulated other comprehensive income will be reclassified as a decrease in interest expense, net.