Derivative Instruments

12 Months Ended

Jan. 03, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

In June 2016, the Company entered into an interest rate cap agreement that became effective July 1, 2016, to hedge cash flows associated with interest rate fluctuations on variable rate debt, with a termination date of March 31, 2020 ("2016 Interest Rate Cap Agreement"). The 2016 Interest Rate Cap Agreement has a notional amount of $70.0 million of the 2015 Senior Credit Facility that effectively converted that portion of the outstanding balance of the 2015 Senior Credit Facility from variable rate debt to capped variable rate debt, resulting in a change in the applicable interest rate from an interest rate of one-month LIBOR plus the applicable margin (as provided by the 2015 Senior Credit Facility) to a capped interest rate of 2.00% plus the applicable margin. During the period from July 1, 2016 through January 3, 2017 (Successor), the 2016 Interest Rate Cap Agreement had no hedge ineffectiveness.

As of December 29, 2015 (Successor) and through June 30, 2016, the Company had an interest rate cap agreement to hedge cash flows associated with interest rate fluctuations on variable rate debt ("2013 Interest Rate Cap Agreement"). The 2013 Interest Rate Cap Agreement had a notional amount of $87.5 million as of December 29, 2015 (Successor). The individual caplet contracts within the interest rate cap agreement expired at various dates through June 30, 2016.

2016 Interest Rate Cap Agreement (Successor)

To ensure the effectiveness of the 2016 Interest Rate Cap Agreement, the Company elected the one-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the interest rate cap agreement as of each reset date. The reset dates and other critical terms on the term loans perfectly match with the interest rate cap reset dates and other critical terms during the fifty-three weeks ended January 3, 2017 (Successor).

As of January 3, 2017 (Successor), the Company was hedging forecasted transactions expected to occur through March 31, 2020. Assuming interest rates at January 3, 2017 (Successor) remain constant, $0.3 million of interest expense related to hedges of these transactions is expected to be reclassified into earnings over the next 39 months. The Company intends to ensure that this hedge remains effective, therefore, approximately two thousand dollars is expected to be reclassified into interest expense over the next 12 months.

The effective portion of the 2016 Interest Rate Cap Agreement through January 3, 2017 (Successor) was included in accumulated other comprehensive income.

2013 Interest Rate Cap Agreement (Predecessor)

To ensure the effectiveness of the 2013 Interest Rate Cap Agreement through June 30, 2015 (Predecessor), the Company elected the three-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the interest rate cap agreement as of each reset date. The reset dates and other critical terms on the term loans perfectly match with the interest rate cap reset dates and other critical terms during the twenty-six weeks ended June 30, 2015 (Predecessor).

As of the July 1, 2015 interest reset date, the Company elected the one-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the 2013 Interest Rate Cap Agreement,


and as a result, this hedge became ineffective. Therefore, after July 1, 2015 through June 30, 2016, any changes in fair value were recorded through interest expense.

The effective portion of the 2013 Interest Rate Cap Agreement through June 30, 2015 (Predecessor) was included in accumulated other comprehensive income and included as a fair value adjustment through the purchase price allocation as described in Note 3.

Warrant Liability (Predecessor)

On March 20, 2015, warrants to purchase 597,802 shares of DTH common stock held by a former large shareholder of DTH were exercised at a strike price of $25.00 per share based on a fair value of $8.3 million determined based on the common stock price of the Initial Investment discussed above in Note 3. Upon exercise, 384,777 shares of DTH common stock were redeemed as payment for the strike price resulting in 213,025 shares of DTH common stock being issued. DTH recorded a mark-to-market adjustment of $35,000 to reduce the liability during the twenty-six weeks ended June 30, 2015 (Predecessor) and then reclassified the balance of the warrant liability of $8.3 million to shareholders’ equity.