Fair Value Measurements

6 Months Ended

Jul. 02, 2011

Fair Value Measurements [Abstract]

Fair Value Disclosures [Text Block]

FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange value of an asset or a liability in an orderly transaction between market participants.  The fair value guidance outlines a valuation framework and establishes a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and disclosures.  The hierarchy consists of three levels as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities as of the reported date;

Level 2 - Other than quoted market prices in active markets for identical assets or liabilities, quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other than quoted prices for assets or liabilities and prices that are derived principally from or corroborated by market data by correlation or other means; and

Level 3 - Measurements using management's best estimate of fair value, where the determination of fair value requires significant management judgment or estimation.

The Company's interest rate swaps are measured under the fair value guidance.  The following table summarizes the hierarchy level the Company used to determine fair value of its interest rate swaps as of July 2, 2011:

	Balance at		Fair Value Hierarchy Level
	July 2, 2011		Level 1	Level 2		Level 3
Liabilities:
Interest rate swaps	$	770	—	$	770	—

The fair value of the interest rate swaps was obtained from external sources and was determined through the use of models that employ various assumptions and relevant economic factors.

The Company's financial instruments are not held or issued for trading purposes.  The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:

	July 2, 2011				December 25, 2010
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	151	$	151	$	244	$	244
Notes receivable, including current portion	339		339		419		419
Financial Liabilities:
Long-term debt and capital leases, including current portion	72,276		74,029		65,215		67,609
Interest rate swaps	770		770		873		873

The fair values of the Company's long-term debt and capital leases were estimated using market rates the Company believes would be available for similar types of financial instruments.  The fair values of cash and cash equivalents and notes receivable approximate their carrying amounts due to the short-term nature of the financial instruments.

The Company's earnings, cash flows and financial position are exposed to market risks relating to interest rates.  It is the Company's policy to minimize its exposure to adverse changes in interest rates and manage interest rate risks inherent in funding the Company with debt.  The Company addresses this financial exposure through a risk management program that includes maintaining a mix of fixed and floating rate debt and the use of interest rate swaps to minimize interest rate volatility. The Company does not hold speculative financial instruments, nor does it hold or issue financial instruments for trading purposes.

Derivatives designated as cash flow hedges relate to specific liabilities on the Company's Consolidated Condensed Balance Sheet.  The Company assesses, both at inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction are highly effective in offsetting changes in cash flows of the hedged items.  When it is determined that a derivative is not highly effective or the derivative expires, is sold, terminated or exercised, the Company discontinues hedge accounting for that specific hedge instrument.  The Company recognizes all derivatives on its Consolidated Condensed Balance Sheet at fair value.  Changes in the fair value of effective cash flow hedges are deferred in accumulated other comprehensive income (loss) ("AOCIL") and reclassified into earnings in the same periods during which the hedged transaction affects earnings.  Changes in the fair value of derivatives that are not effective hedges are recognized in income.

The Company was a party to an interest rate swap agreement with a notional amount of $30,000 through May 11, 2010.  Under this interest rate swap agreement, the Company paid a fixed rate of interest of 4.79% times the notional amount and received in return a specified variable rate of interest times the same notional amount.  The interest rate swap agreement hedged the Company's variable rate interest payments and was considered a highly effective hedge.

On April 7, 2010, the Company entered into an interest rate swap agreement with a notional amount of $25,000 effective May 11, 2010 through May 11, 2013.  The Company did not designate this derivative instrument as a cash flow hedge and as a result recognized the fair value of this instrument in earnings.  Under this interest rate swap agreement, the Company paid a fixed rate of interest of 2.38% times the notional amount and received in return a specified variable rate of interest times the same notional amount.  Due to a significant drop in rates, the Company terminated the agreement in July 2010 and paid a termination fee of $300 which represented the fair value of the instrument.  The Company entered into another interest rate swap agreement designated as a cash flow hedge with a notional amount of $25,000 effective July 11, 2010 through May 11, 2013.  Under this interest rate swap agreement, the Company pays a fixed rate of interest of 1.42% times the notional amount and receives in return a specified variable rate of interest times the same notional amount.

The Company is also a party to an interest rate swap agreement through March 2013, which is linked to a mortgage and considered a highly effective hedge.  Under the interest rate swap agreement, the Company pays a fixed rate of interest times a notional amount equal to the outstanding balance of the mortgage, and receives in return an amount equal to a specified variable rate of interest times the same notional amount.  At July 2, 2011, the notional amount of the interest rate swap agreement was $5,560.  Under the terms of the interest rate swap agreement, the Company pays a fixed rate of interest through March 2013, which effectively fixes the interest rate on the mortgage at 6.54%.

The following table summarizes the fair values of derivative instruments included in the Company's Consolidated Condensed Balance Sheets:

	Liability Derivatives
	July 2, 2011		December 25, 2010
Derivatives designated as hedging instruments:
Interest rate swaps:
Accrued expenses	$	515	$	495
Other long-term liabilities	255		378
Total	770		873

The following tables summarize the pre-tax impact of derivative instruments on the Company's financial statements:

	Three Months Ended						Six Months Ended
	Amount of Gain or (Loss) Recognized in AOCI on Derivative (effective portion)						Amount of Gain or (Loss) Recognized in AOCI on Derivative (effective portion)
	July 2, 2011			June 26, 2010			July 2, 2011			June 26, 2010
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(258	)	$	(108	)	$	(214	)	$	(205	)

	Three Months Ended						Six Months Ended
	Amount of Gain or (Loss) Reclassified from AOCI into Income (effective portion) (1) (2)						Amount of Gain or (Loss) Reclassified from AOCI into Income (effective portion) (1) (2)
	July 2, 2011			June 26, 2010			July 2, 2011			June 26, 2010
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(137	)	$	(233	)	$	(277	)	$	(643	)

	Three Months Ended					Six Months Ended
	Amount of Gain or (Loss)  Recognized in Income on Derivative (ineffective portion)(3)					Amount of Gain or (Loss)  Recognized in Income on Derivative (ineffective portion)(3)
	July 2, 2011			June 26, 2010		July 2, 2011		June 26, 2010
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(1	)	$	—	$	1	$	—

	Three Months Ended					Six Months Ended
	Amount of Gain or (Loss)  Recognized in Income on Derivative (3)					Amount of Gain or (Loss)  Recognized in Income on Derivative (3)
	July 2, 2011		June 26, 2010			July 2, 2011		June 26, 2010
Derivatives not designated as hedging instruments:
Interest rate swap	$	—	$	(300	)	$	—	$	(300	)

(1) The amount of gain (loss) reclassified from AOCIL is included in interest expense on the Company's Consolidated Condensed Statements of Operations.

(2) The amount of loss expected to be reclassified from AOCIL into earnings during the next 12 months subsequent to July 2, 2011 is $515.

(3) The amount of gain (loss) recognized in income on the ineffective portion of interest rate swaps is included in other expense on the Company's Consolidated Condensed Statements of Operations.