Derivative Instruments

3 Months Ended

Mar. 24, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

2016 Interest Rate Cap Agreement

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 had an initial notional amount of $70.0 million of the Senior Credit Facility that effectively converted that portion of the outstanding balance of the 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 Senior Credit Facility) to a capped interest rate of 2.00% plus the applicable margin. During the period from July 1, 2016 through March 24, 2020, the 2016 Interest Rate Cap Agreement had no hedge ineffectiveness.

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 perfectly match with the interest rate cap reset dates and other critical terms during the twelve weeks ended March 24, 2020.

During the twelve weeks weeks ended March 24, 2020, the Company reclassified $62,000 of interest expense related to the hedges of these transactions into earnings. As of March 24, 2020, the Company was hedging forecasted transactions expected to occur through March 31, 2020. Assuming interest rates at March 24, 2020 remain constant and the hedge remains effective, $5,000 of interest expense related to hedges of these transactions will be reclassified into earnings over the next week until the expiration of the interest rate cap on March 31, 2020.

The effective portion of the 2016 Interest Rate Cap Agreement through March 24, 2020 was included in accumulated other comprehensive income.