Derivative Financial Instruments

9 Months Ended

Sep. 28, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments:

Derivative financial instruments are used within the Partnership’s overall risk management program to manage certain interest rate and foreign currency risks. By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, the Partnership is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, hedging instruments are placed with a counterparty that the Partnership believes poses minimal credit risk.

The Partnership does not use derivative financial instruments for trading purposes.

We have entered into several interest rate swaps that fix all of our variable rate term-debt payments. As of September 28, 2014, we have $800 million of variable-rate debt to fixed rates swaps that mature in December 2015 and fix LIBOR at a weighted average rate of 2.38%. These swaps have been de-designated as cash flow hedges. During the third quarter and fourth quarter of 2013, we entered into four forward-starting interest rate swap agreements that will effectively convert $500 million of variable-rate debt to fixed rates beginning in December of 2015. These swaps, which were designated as cash flow hedges, mature on December 31, 2018 and fix LIBOR at a weighted average rate of 2.94%.

Fair Value of Derivative Instruments and the Classification in Condensed Consolidated Balance Sheet:

(In thousands)	Condensed Consolidated Balance Sheet Location	Fair Value as of			Fair Value as of			Fair Value as of
		September 28, 2014			December 31, 2013			September 29, 2013
Derivatives designated as hedging instruments:
Interest rate swaps	Derivative Liability	$	(10,044	)	$	(3,916	)	$	(5,483	)
Total derivatives designated as hedging instruments		$	(10,044	)	$	(3,916	)	$	(5,483	)
Derivatives not designated as hedging instruments:
Interest rate swaps	Derivative Liability	$	(15,758	)	$	(22,746	)	$	(26,163	)
Total derivatives not designated as hedging instruments		$	(15,758	)	$	(22,746	)	$	(26,163	)
Net derivative liability		$	(25,802	)	$	(26,662	)	$	(31,646	)

Derivatives Designated as Hedging Instruments

Changes in fair value of highly effective hedges are recorded as a component of accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets. Any ineffectiveness is recognized immediately in income. Amounts recorded as a component of accumulated other comprehensive loss are reclassified into earnings in the same period the forecasted transactions affect earnings. As of September 28, 2014 we have no amounts that are forecasted to be reclassified into earnings in the next twelve months.

Derivatives Not Designated as Hedging Instruments

Certain interest rate swap contracts were deemed ineffective in prior years and no longer qualified for hedge accounting. As a result of discontinued hedge accounting, the instruments are prospectively adjusted to fair value each reporting period through "Net effect of swaps" on the unaudited condensed consolidated statements of operations and comprehensive income. The amounts that were previously recorded as a component of accumulated other comprehensive loss prior to the de-designation are reclassified to earnings and a corresponding realized gain or loss will be recognized when the forecasted cash flow occurs. As of September 28, 2014, approximately $7.8 million of losses remain in accumulated comprehensive loss related to the effective cash flow hedge contracts prior to de-designation. We estimate that losses of $7.8 million will be reclassified to earnings within the next 12 months.

The following table presents our derivative portfolio along with their notional amounts and their fixed interest rates as of September 28, 2014.

	Interest Rate Swaps
($'s in thousands)	Derivatives designated as hedging instruments				Derivatives not designated as hedging instruments
	Notional Amounts		LIBOR Rate		Notional Amounts		LIBOR Rate
	$	200,000	3.00	%	$	200,000	2.27	%
	100,000		3.00	%	150,000		2.43	%
	100,000		3.00	%	75,000		2.30	%
	100,000		2.70	%	70,000		2.54	%
					50,000		2.54	%
					50,000		2.54	%
					50,000		2.43	%
					50,000		2.29	%
					50,000		2.29	%
					30,000		2.54	%
					25,000		2.30	%
Total $'s / Average Rate	$	500,000	2.94	%	$	800,000	2.38	%

Effects of Derivative Instruments on Income (Loss) and Other Comprehensive Income (Loss) for the three-month periods ended September 28, 2014 and September 29, 2013:

(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

9/28/14

9/29/13

9/28/14

9/29/13

9/28/14

9/29/13

Interest rate swaps

$

1,235

$

(5,483

)

Interest Expense

$

—

$

—

Net effect of swaps

$

—

$

—

(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
		9/28/14		9/29/13
Interest rate swaps	Net effect of swaps	$	3,073	$	609
		$	3,073	$	609

During the quarter ended September 28, 2014, in addition to gains of $3.1 million recognized in income on the derivatives not designated as cash flow hedges (as noted in the tables above), $2.0 million of expense representing the regular amortization of amounts in AOCI was recorded in the condensed consolidated statements of operations for the quarter. The effect of these amounts resulted in a benefit to earnings of $1.1 million recorded in “Net effect of swaps.”

For the three-month period ended September 29, 2013, in addition to the $0.6 million recognized in income on the derivatives not designated as cash flow hedges (as noted in the tables above), $2.0 million of expense representing the amortization of amounts in AOCI was recorded in the condensed consolidated statements of operations. The effect of these amounts resulted in a charge 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 nine-month periods ended September 28, 2014 and September 29, 2013:

(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	Nine months ended			Nine months ended				Nine months ended		Nine months ended				Nine months ended		Nine months ended
	9/28/14			9/29/13				9/28/14		9/29/13				9/28/14		9/29/13
Interest rate swaps	$	(6,129	)	$	(3,217	)	Interest Expense	$	—	$	(2,797	)	Net effect of swaps	$	—	$	3,703

(In thousands)	Amount and Location of Gain (Loss) Recognized in Income on Derivative
Derivatives not designated as Cash Flow Hedging Relationships		Nine months ended		Nine months ended
		9/28/14		9/29/13
Interest rate swaps	Net effect of swaps	$	6,991	$	130
		$	6,991	$	130

During the nine-month period ended ended September 28, 2014, in addition to gains of $7.0 million recognized in income on the derivatives not designated as cash flow hedges (as noted in the tables above), $6.0 million of expense representing the regular amortization of amounts in AOCI was recorded in the condensed consolidated statements of operations for the quarter. The effect of these amounts resulted in a benefit to earnings of $1.0 million recorded in “Net effect of swaps.”

For the nine-month period ended September 29, 2013, in addition to the $3.7 million gain recognized in income on the ineffective portion of derivatives and $0.1 million gain on the derivatives not designated as cash flow hedges (as noted in the tables above), $7.8 million of expense related to the write off of OCI balances on our May 2011 swaps and $4.3 million of expense representing the amortization of amounts in AOCI was recorded in the condensed consolidated statements of operations. The effect of these amounts resulted in a charge to earnings of $8.3 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 September 28, 2014 and September 29, 2013:

(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
	9/28/14			9/29/13				9/28/14		9/29/13				9/28/14		9/29/13
Interest rate swaps	$	(4,562	)	$	(769	)	Interest Expense	$	—	$	(5,820	)	Net effect of swaps	$	—	$	3,703

(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
		9/28/14		9/29/13
Interest rate swaps	Net effect of swaps	$	10,408	$	130
		$	10,408	$	130

During the twelve-month period ending September 28, 2014, in addition to the $10.4 million gain recognized in income on derivatives not designated as cash flow hedges (as noted in the tables above), $7.9 million of expense representing the amortization of amounts in AOCI for the swaps was recorded during the trailing twelve months ended September 28, 2014 in the condensed consolidated statements of operations. The effect of these amounts resulted in a benefit to earnings of $2.5 million recorded in “Net effect of swaps.”

For the twelve-month period ending September 29, 2013, in addition to the $3.7 million gain recognized in income on the ineffective portion of designated derivatives and $0.1 million of gain recognized in income on the derivatives not designated as cash flow hedges as noted in the tables above, $7.8 million of expense related to the write off of OCI balances on our May 2011 swaps and $4.1 million of expense representing the amortization of amounts in AOCI for the swaps was recorded during the trailing twelve months ended September 29, 2013 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 $8.1 million recorded in “Net effect of swaps.”