Derivative Financial Instruments:

Derivative financial instruments are only used within the Partnership’s overall risk management program to manage certain interest rate and foreign currency risks from time to time. The Partnership does not use derivative financial instruments for trading purposes.

The Partnership had effectively converted a total of $1.0 billion of its variable-rate debt to fixed rates through the use of several interest rate swap agreements through October 1, 2011. Cash flows related to these interest rate swap agreements were included in interest expense over the term of the agreements. These interest rate swap agreements expired in October 2011. The Partnership had designated all of these interest rate swap agreements and hedging relationships as cash flow hedges.

In order to maintain fixed interest costs on a portion of its domestic term debt beyond the expiration of the swaps entered into in 2006 and 2007, in September 2010 the Partnership entered into several forward-starting swap agreements ("September 2010 swaps") to effectively convert a total of $600 million of variable-rate debt to fixed rates beginning in October 2011. As a result of the February 2011 amendment to the 2010 Credit Agreement, the LIBOR floor on the term loan portion of its credit facilities decreased to 100 bps from 150 bps, causing a mismatch in critical terms of the September 2010 swaps and the underlying debt. Because of the mismatch of critical terms, the Partnership determined the September 2010 swaps, which were originally designated as cash flow hedges, were no longer highly effective, resulting in the de-designation of the swaps as of the end of February 2011. As a result of this ineffectiveness, gains of $7.2 million recorded in accumulated other comprehensive income (AOCI) through the date of de-designation are being amortized through December 2015, to a balance of $3.9 million to offset the change in fair value during the period of de-designation as discussed below. Of the $6.3 million remaining in AOCI as of July 1, 2012, $2.4 million has yet to be amortized.

In March 2011, the Partnership entered into several additional forward-starting basis-rate swap agreements ("March 2011 swaps") that, when combined with the September 2010 swaps, effectively converted $600 million of variable-rate debt to fixed rates beginning in October 2011. The September 2010 swaps and the March 2011 swaps, which have been jointly designated as cash flow hedges, mature in December 2015 and fix LIBOR at a weighted average rate of 2.46%. For the period that the September 2010 swaps were de-designated, their fair value decreased by $3.3 million, the offset of which was recognized as a direct charge to the Partnership's earnings and recorded to “Net effect of swaps” on the consolidated statement of operations along with the regular amortization of “Other comprehensive income (loss)” balances related to these swaps. No other ineffectiveness related to these swaps was recorded in any period presented.

In May 2011, the Partnership entered into four additional forward-starting basis-rate swap agreements ("May 2011 swaps") that effectively converted another $200 million of variable-rate debt to fixed rates beginning in October 2011. These swaps, which were designated as cash flow hedges, mature in December 2015 and fix LIBOR at a weighted average rate of 2.54%.

The fair market value of the September 2010 swaps, the March 2011 swaps, and the May 2011 swaps at July 1, 2012 was a liability of $35.1 million, which was recorded in “Derivative Liability” on the condensed consolidated balance sheet.

In 2007, the Partnership entered into two cross-currency swap agreements, which effectively converted $268.7 million of term debt at the time, and the associated interest payments, related to its wholly owned Canadian subsidiary from variable U.S. dollar denominated debt to fixed-rate Canadian dollar denominated debt. The Partnership originally designated these cross-currency swaps as foreign currency cash flow hedges. Cash flows related to these swap agreements were included in interest expense over the term of the agreement. These swap agreements expired in February 2012.

In May 2011 and July 2011, the Partnership entered into several foreign currency swap agreements to fix the exchange rate on approximately 75% of the termination payment associated with the cross-currency swap agreements that expired in February 2012. The Partnership did not seek hedge accounting treatment on these foreign currency swaps, and as such, changes in fair value of the swaps flowed directly through earnings along with changes in fair value on the related, de-designated cross-currency swaps. In February 2012, all of the cross-currency and related currency swap agreements were settled for $50.5 million.

Fair Value of Derivative Instruments in Condensed Consolidated Balance Sheet:



(In thousands):	Condensed Consolidated Balance Sheet Location	Fair Value as of			Fair Value as of			Fair Value as of
(In thousands):	Condensed Consolidated Balance Sheet Location	July 1, 2012			December 31, 2011			June 26, 2011
Derivatives designated as hedging instruments:
Interest rate swaps	Current derivative liability	$	—		$	—		$	(20,193	)
Interest rate swaps	Derivative Liability	(35,146		)	(32,400		)	(16,750		)
Total derivatives designated as hedging instruments		$	(35,146	)	$	(32,400	)	$	(36,943	)
Derivatives not designated as hedging instruments:
Foreign currency swaps	Current derivative liability	$	—		$	(13,155	)	$	(4,273	)
Cross-currency swaps	Current derivative liability	—			(37,617		)	(53,107		)
Total derivatives not designated as hedging instruments		$	—		$	(50,772	)	$	(57,380	)
Net derivative liability		$	(35,146	)	$	(83,172	)	$	(94,323	)

The following table presents our September 2010 swaps, March 2011 swaps, and May 2011 swaps, which became effective October 1, 2011 and mature December 15, 2015, along with their notional amounts and their fixed interest rates.



($'s in thousands)	Interest Rate Swaps
	Notional Amounts		LIBOR Rate
	$	200,000	2.40	%
	75,000		2.43	%
	50,000		2.42	%
	150,000		2.55	%
	50,000		2.42	%
	50,000		2.55	%
	25,000		2.43	%
	50,000		2.54	%
	30,000		2.54	%
	70,000		2.54	%
	50,000		2.54	%
Total $'s / Average Rate	$	800,000	2.48	%

The following table presents our fixed-rate swaps, which matured in October 2011, and the cross-currency swap which matured in February 2012, along with their notional amounts and their fixed interest rates:



($'s in thousands)	Interest Rate Swaps				Cross-currency Swaps
	Notional Amounts		LIBOR Rate		Notional Amounts		Implied Interest Rate
	$	200,000	5.64	%	$	255,000	7.31	%
	200,000		5.64	%	150		9.50	%
	200,000		5.64	%
	200,000		5.57	%
	100,000		5.60	%
	100,000		5.60	%
Total $'s / Average Rate	$	1,000,000	5.62	%	$	255,150	7.31	%

Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the three-month periods ended July 1, 2012 and June 26, 2011:



(In thousands):	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)						Amount and Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Amount and Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Derivatives designated as Cash Flow Hedging Relationships	Three months ended			Three months ended				Three months ended			Three months ended			Three months ended		Three months ended
Derivatives designated as Cash Flow Hedging Relationships	7/1/12			6/26/11				7/1/12			6/26/11			7/1/12		6/26/11
Interest rate swaps	$	(2,866	)	$	(20,558	)	Interest Expense	$	(3,221	)	$	—	Net effect of swaps	$	—	$	13,300
Total	$	(2,866	)	$	(20,558	)		$	(3,221	)	$	—		$	—	$	13,300



(In thousands):	Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Three months ended		Three months ended
		7/1/12		6/26/11
Cross-currency swaps⁽¹⁾	Net effect of swaps	$	—	$	3,772
Foreign currency swaps	Net effect of swaps	—		(4,306		)
		$	—	$	(534	)


(1)	The cross-currency swaps became ineffective and were de-designated in August 2009.

During the quarter ended July 1, 2012, $0.2 million of income representing the regular amortization of amounts in AOCI was recorded in the condensed consolidated statements of operations for the quarter. The effect of this amortization resulted in a benefit to earnings of $0.2 million recorded in “Net effect of swaps.”

For the three-month period ended June 26, 2011, in addition to the $12.8 million gain recognized in income on the ineffective portion of derivatives noted in the table above, $11.3 million of expense representing the amortization of amounts in AOCI for the swaps and $0.1 million of foreign currency loss in the quarter related to the U.S. dollar denominated Canadian term loan were recorded in “Net effect of swaps” in the condensed consolidated statements of operations. The net effect of these amounts resulted in a benefit to earnings of $1.4 million recorded in “Net effect of swaps.”

Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the six-month periods ended July 1, 2012 and June 26, 2011:



(In thousands):	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)						Amount and Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Amount and Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Derivatives designated as Cash Flow Hedging Relationships	Six months ended			Six months ended				Six months ended			Six months ended			Six months ended		Six months ended
Derivatives designated as Cash Flow Hedging Relationships	7/1/12			6/26/11				7/1/12			6/26/11			7/1/12		6/26/11
Interest rate swaps	$	(2,746	)	$	(19,703	)	Interest Expense	$	(6,014	)	$	—	Net effect of swaps	$	—	$	27,794
Total	$	(2,746	)	$	(19,703	)		$	(6,014	)	$	—		$	—	$	27,794



(In thousands):	Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Six months ended			Six months ended
		7/1/12			6/26/11
Interest rate swaps ⁽¹⁾	Net effect of swaps	$	—		$	(3,342	)
Cross-currency swaps⁽²⁾	Net effect of swaps	(4,999		)	1,960
Foreign currency swaps	Net effect of swaps	6,278			(4,306		)
		$	1,279		$	(5,688	)


(1)	The September 2010 swaps became ineffective and were de-designated in February 2011.


(2)	The cross-currency swaps became ineffective and were de-designated in August 2009.

For the six-month period ended July 1, 2012, in addition to the $1.3 million of net gain recognized in income on the ineffective portion of derivatives and on the derivatives not designated as cash flow hedges (as noted in the tables above), $0.4 million of expense representing the regular amortization of amounts in AOCI for the swaps and $0.2 million of foreign currency gain in the period related to the U.S. dollar denominated Canadian term loan were recorded in the condensed consolidated statements of operations for the period. The net effect of these amounts resulted in a benefit to earnings for the period of $1.1 million recorded in “Net effect of swaps.”

For the six-month period ended June 26, 2011, in addition to the $22.1 million gain recognized in income on the ineffective portion of derivatives noted in the table above, $22.8 million of expense representing the amortization of amounts in AOCI for the swaps and $0.2 million of foreign currency gain in the period related to the U.S. dollar denominated Canadian term loan were recorded in “Net effect of swaps” in the condensed consolidated statements of operations. The net effect of these amounts resulted in a charge to earnings of $0.5 million recorded in “Net effect of swaps.”

Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the twelve-month periods ended July 1, 2012 and June 26, 2011:



(In thousands):	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)						Amount and Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Amount and Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
Derivatives designated as Cash Flow Hedging Relationships	Twelve months ended			Twelve months ended				Twelve months ended			Twelve months ended			Twelve months ended		Twelve months ended
Derivatives designated as Cash Flow Hedging Relationships	7/1/12			6/26/11				7/1/12			6/26/11			7/1/12		6/26/11
Interest rate swaps	$	(18,396	)	$	(13,409	)	Interest Expense	$	(9,037	)	$	—	Net effect of swaps	$	20,193	$	48,168



(In thousands):	Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Twelve months ended			Twelve months ended
		7/1/12			6/26/11
Interest rate swaps ⁽¹⁾	Net effect of swaps	$	—		$	(3,342	)
Cross-currency swaps ⁽²⁾	Net effect of swaps	9,139			(3,597		)
Foreign currency swaps	Net effect of swaps	(3,081		)	(4,306		)
		$	6,058		$	(11,245	)


(1)	The September 2010 swaps became ineffective and were de-designated in February 2011.


(2)	The cross-currency swaps became ineffective and were de-designated in August 2009.

In addition to the $26.3 million of gain recognized in income on the ineffective portion of derivatives and on the derivatives not designated as cash flow hedges (as noted in the tables above), $11.3 million of expense representing the amortization of amounts in AOCI for the swaps and a $0.3 million foreign currency gain in the twelve month period related to the U.S. dollar denominated Canadian term loan was recorded during the trailing twelve months ended July 1, 2012 in the condensed consolidated statements of operations. The net effect of these amounts resulted in a benefit to earnings for the trailing twelve month period of $14.7 million recorded in “Net effect of swaps.”

For the twelve month period ending June 26, 2011, in addition to the $36.9 million of gain recognized in income on the ineffective portion of derivatives noted in the table above, $46.4 million of expense representing the amortization of amounts in AOCI for the swaps and a $0.5 million foreign currency gain in the twelve month period related to the U.S. dollar denominated Canadian term loan was recorded during the trailing twelve months ended June 26, 2011 in the condensed consolidated statements of operations. The net effect of these amounts resulted in a charge to earnings for the trailing twelve month period of $9.0 million recorded in “Net effect of swaps.” For the period, an additional $9.5 million of amortization of amounts in AOCI for the cross-currency swaps was recorded as a charge to earnings in "Loss on early extinguishment of debt" in the condensed consolidated statements of operations as a result of the debt refinancing and the reduction of the majority of the U.S. dollar denominated Canadian term loan.

The amounts reclassified from AOCI into income for the periods noted above are in large part the result of the Partnership’s initial three-year requirement to swap at least 75% of its aggregate term debt to fixed rates under the terms of the Amended 2010 Credit Agreement.