Derivatives

9 Months Ended

Oct. 07, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 7 – Derivatives

Hedging of Interest Rate Risk

During the first quarter of 2023, the Company entered into an interest rate swap contract to mitigate its exposure to changes in variable interest rates. The Company's interest rate swap is designated as a cash flow hedge as of both the effective date, March 17, 2023, and as of October 7, 2023. The interest rate swap is reflected at its fair value in the condensed consolidated balance sheets. Refer to Note 6 for further information on the fair value of the interest rate swap.

Details of the pay-fixed, receive-floating interest rate swap contract as of October 7, 2023 are as follows:


Effective Date	Maturity Date	Notional Value (in millions)	Pay Fixed Rate	Receive Floating Rate	Floating Rate Reset Terms
March 17, 2023	November 17, 2027	$150	3.646%	One-Month CME Term SOFR	Monthly

The Company performed an initial quantitative assessment of hedge effectiveness using the change-in-variable-cash-flows method. Under this method, the Company assessed the effectiveness of the hedging relationship by comparing the present value of the cumulative change in the expected future cash flows on the variable leg of the interest rate swap with the present value of the cumulative change in the expected future interest cash flows on the variable-rate debt. The Company determined the interest rate swap to be highly effective. To assess for continued hedge effectiveness, the Company performs a retrospective and prospective qualitative assessment each quarter. The Company also monitors the credit risk of the counterparty on an ongoing basis. The change in the fair value of the interest rate swap is initially reported in "Other comprehensive income" in the condensed consolidated statements of comprehensive income and subsequently reclassified to earnings in "Interest expense, net" in the condensed consolidated statements of earnings when the hedged transactions affect earnings.

The location and the fair value of the interest rate swap in the condensed consolidated balance sheets as of October 7, 2023 is as follows:


		Derivative Fair Value
		October 7,
(In thousands)	Condensed Consolidated Balance Sheet Location	2023
Cash Flow Hedge:
Interest rate swap	Prepaid expenses and other current assets	$	2,489
Interest rate swap	Other assets, net		2,344
Interest rate swap	Accumulated other comprehensive income		3,652

The location and amount of gains recognized in the condensed consolidated statements of earnings for the interest rate swap, presented on a pre-tax basis, are as follows:


	12 Weeks Ended		40 Weeks Ended
	October 7,		October 7,
	2023		2023
(In thousands)	Interest expense, net		Interest expense, net
Total amounts of expense line items presented in the condensed consolidated statements of earnings in which the effects of cash flow hedges are recorded	$	9,280	$	30,218
Gain on cash flow hedging relationships:
Gain reclassified from comprehensive income into earnings		573		1,242