Derivatives and Hedging |
3 Months Ended |
|---|---|
Mar. 30, 2019 | |
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivatives and Hedging |
The Company uses derivative financial instruments to manage our exposures to (1) interest rate fluctuations on our floating rate senior debt and (2) fluctuations in foreign currency exchange rates. The Company measures those instruments at fair value and recognizes changes in the fair value of derivatives in earnings in the period of change, unless the derivative qualifies as an effective hedge that offsets certain exposures.
Interest Rate Swap Agreements
On January 8, 2018, the Company entered into a forward Interest Rate Swap Agreement ("2018 Swap 1") with three-year terms for notional amounts of $90,000. The forward start date of the 2018 Swap was September 30, 2018 and the termination date is June 30, 2021. The 2018 Swap 1 has a determined interest rate of 2.3% plus the applicable interest rate margin of 4.0% for an effective rate of 6.3%.
On November 8, 2018, the Company entered into another new forward Interest Rate Swap Agreement ("2018 Swap 2")with three-year terms for $60,000 notional amount. The forward start date of the 2018 Swap 2 was November 30, 2018 and the termination date is November 30, 2022. The 2018 Swap 2 has an interest rate of 2.5% plus the applicable interest rate margin of 4.0% for an effective rate of 6.5%.
The fair value of the 2018 Swaps was $2,097 as of March 30, 2019. These were reported on the condensed consolidated balance sheet in other non-current liabilities. An increase in other expense recorded in the statement of comprehensive loss for the unfavorable change of $1,113 in fair value since December 29, 2018.
The fair value of 2018 Swap 1 was $394 as of December 29, 2018 and it was reported on the consolidated balance sheet in other non-current assets. The fair value of 2018 Swap 2 was $1,378 and it was reported on the consolidated balance sheet in other non-current liabilities as of December 29, 2018.
The Company's interest rate swap agreements do not qualify for hedge accounting treatment because they did not meet the provisions specified in ASC 815, Derivatives and Hedging (“ASC 815”). Accordingly, the gain or loss on these derivatives was recognized in current earnings.
Foreign Currency Forward Contracts
During 2018 and 2019 the Company entered into multiple foreign currency forward contracts. The purpose of the Company's foreign currency forward contracts is to manage the Company's exposure to fluctuations in the exchange rate of the Canadian dollar.
The total notional amount of contracts outstanding was C$3,205 and C$5,790 as of March 30, 2019 and December 29, 2018, respectively. The total fair value of the outstanding foreign currency forward contracts was $13 and $152 as of March 30, 2019 and December 29, 2018, respectively, and was reported on the condensed consolidated balance sheet in other current liabilities. An increase in other income of $114, including contracts settled during the thirteen weeks ended March 30, 2019, was recorded in the statement of comprehensive loss for the change in fair value from December 29, 2018.
The Company's foreign currency forward contracts do not qualify for hedge accounting treatment because they did not meet the provisions specified in ASC 815. Accordingly, the gain or loss on these derivatives was recognized in current earnings.
The Company does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.
Additional information with respect to the fair value of derivative instruments is included in Note 13 - Fair Value Measurements.
|