Derivative Instruments

6 Months Ended

Jul. 02, 2016

Derivative Instrument Detail [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

We are exposed to certain risks relating to our business operations. We use derivative instruments to manage interest rate risks. The fair value of the derivative instrument liability in the Condensed Consolidated Balance Sheets using Level 2 inputs was as follows:

(in thousands)	Balance Sheet Location	July 2, 2016			January 2, 2016
Derivatives designated as hedges:
Interest rate swaps	Other noncurrent liabilities	$	(3,701	)	$	(1,045	)
Total fair value of derivative instruments		$	(3,701	)	$	(1,045	)

Interest Rate Swaps

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate and U.S. base rate interest. To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements in order to maintain a desired proportion of fixed to variable-rate debt. These swaps are accounted for as cash flow hedges. The fair value of interest rate swaps was determined utilizing a market approach model using the notional amount of the interest rate swaps and the observable inputs of time to maturity and interest rates. The notional amount of the interest rate swaps designated as hedging instruments as of both July 2, 2016 and January 2, 2016 was $75.0 million.

In February 2015, we entered into two interest rate swap agreements to manage the exposure to changing interest rates on long-term debt. We entered into an agreement with a notional amount of $25.0 million in order to fix a portion of our term loan due in May 2019 at an interest rate of 1.58%, plus applicable margins, effective for the interest periods through May 2019. A second agreement with a notional amount of $50.0 million was entered into in order to fix a portion of our term loan due in May 2024 at an interest rate of 1.98%, plus applicable margins, effective for the interest periods through May 2022.

Changes in Other Comprehensive Income

The changes in unrealized losses, net of income tax, included in other comprehensive income due to fluctuations in interest rates were as follows:

	Quarter Ended					Six Months Ended
(in thousands)	July 2, 2016			July 4, 2015		July 2, 2016			July 4, 2015
(Losses)/gains on interest rate swaps, net of income tax benefit/(expense) of $319, $(527), $1,028 and $(2), respectively	$	(503	)	$	845	$	(1,627	)	$	4
Total change in unrealized losses from derivative instruments, net of income tax (effective portion)	$	(503	)	$	845	$	(1,627	)	$	4