Derivative Financial Instruments

9 Months Ended

Sep. 25, 2016

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 interest rate risk. By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, the Partnership is exposed to counterparty credit risk, in particular 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.

In the first quarter of 2016, the Partnership amended each of its four interest rate swap agreements to extend each of the maturities by two years to December 31, 2020 and to fix LIBOR at a rate of 2.64%. As a result of the amendments, the previously existing interest rate swap agreements were de-designated, and the amounts recorded in AOCI are being amortized into earnings through the original December 2018 maturity. The newly amended interest rate swap agreements are not designated as hedging instruments. There were no other changes to the terms of the agreements beyond those disclosed.

The fair value of derivative financial instruments and their classification within the unaudited condensed consolidated balance sheets as of September 25, 2016, December 31, 2015, and September 27, 2015 are as follows:

(In thousands)	Unaudited Condensed Consolidated Balance Sheet Location	Fair Value as of			Fair Value as of			Fair Value as of
		September 25, 2016			December 31, 2015			September 27, 2015
Derivatives designated as hedging instruments:
Interest rate swaps	Derivative Liability	$	—		$	(22,918	)	$	(24,042	)
Total derivatives designated as hedging instruments		$	—		$	(22,918	)	$	(24,042	)
Derivatives not designated as hedging instruments:
Interest rate swaps	Current Derivative Liability	$	—		$	—		$	(3,770	)
Interest rate swaps	Derivative Liability	$	(30,185	)	$	—		$	—
Total derivatives not designated as hedging instruments		$	(30,185	)	$	—		$	(3,770	)
Net derivative liability		$	(30,185	)	$	(22,918	)	$	(27,812	)

Derivatives Designated as Hedging Instruments

Changes in fair value of highly effective hedges are recorded as a component of AOCI in the balance sheet. Any ineffectiveness is recognized immediately in income. Amounts recorded as a component of accumulated other comprehensive income are reclassified into earnings in the same period the forecasted transactions affect earnings. As a result of the first quarter of 2016 amendments, the previously existing interest rate swap agreements were de-designated and the newly amended interest rate swap agreements are not designated as hedging instruments. As of September 25, 2016, we have no designated derivatives; therefore, no amount of designated derivatives are forecasted to be reclassified into earnings in the next twelve months.

Derivatives Not Designated as Hedging Instruments

Instruments that do not qualify for hedge accounting or were de-designated are prospectively adjusted to fair value each reporting period through "Net effect of swaps" in the unaudited condensed consolidated statements of operations and comprehensive income. The amounts that were previously recorded as a component of AOCI 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 a result of the first quarter 2016 amendments, the previously existing interest rate swap agreements were de-designated, and the amounts previously recorded in AOCI are being amortized into earnings through the original December 2018 maturity. As of September 25, 2016, approximately $21.3 million of losses remain in AOCI related to the effective cash flow hedge contracts prior to de-designation, $9.5 million of which will be reclassified to earnings within the next twelve months.

The following table summarizes the effect of derivative instruments on income and other comprehensive income for the three-month periods ended September 25, 2016 and September 27, 2015:

(In thousands)	Amount of Gain (Loss) recognized in 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 Derivatives
Designated Derivatives	Three months ended 9/25/2016		Three months ended 9/27/2015			Designated Derivatives	Three months ended 9/25/2016		Three months ended 9/27/2015		Derivatives Not Designated	Three months ended 9/25/2016		Three months ended 9/27/2015
Interest rate swaps	$	—	$	(5,237	)	Interest Expense	$	—	$	—	Net effect of swaps	$	715	$	3,125

During the quarter ended September 25, 2016, the Partnership recognized $0.7 million of gains on the derivatives not designated as cash flow hedges and $2.4 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $1.7 million recorded in “Net effect of swaps.”

During the quarter ended September 27, 2015, the Partnership recognized $3.1 million of gains on the derivatives not designated as cash flow hedges and $1.7 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $1.4 million recorded in “Net effect of swaps.”

The following table summarizes the effect of derivative instruments on income and other comprehensive income for the nine-month periods ended September 25, 2016 and September 27, 2015:

(In thousands)	Amount of Gain (Loss) recognized in 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 Derivatives
Designated Derivatives	Nine months ended 9/25/2016			Nine months ended 9/27/2015			Designated Derivatives	Nine months ended 9/25/2016			Nine months ended 9/27/2015		Derivatives Not Designated	Nine months ended 9/25/2016			Nine months ended 9/27/2015
Interest rate swaps	$	(4,671	)	$	(9,393	)	Interest Expense	$	(851	)	$	—	Net effect of swaps	$	(2,596	)	$	8,021

During the nine-month period ended September 25, 2016, the Partnership recognized $2.6 million of losses on the derivatives not designated as cash flow hedges and $6.3 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $8.9 million recorded in “Net effect of swaps.”

During the nine-month period ended September 27, 2015, the Partnership recognized $8.0 million of gains on the derivatives not designated as cash flow hedges and $5.1 million of expense representing the amortization of amounts in AOCI. The effect of these amounts resulted in a benefit to earnings of $3.0 million recorded in “Net effect of swaps.”