Derivative Financial Instruments

9 Months Ended

Sep. 24, 2017

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 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 effectively convert $500 million of variable-rate debt to 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 31, 2018 maturity. The amended interest rate swap agreements are not designated as hedging instruments.

The fair market value of the Partnership's swap portfolio was recorded within "Derivative Liability" on the unaudited condensed consolidated balance sheets as of September 24, 2017, December 31, 2016, and September 25, 2016 as follows:

(In thousands)	September 24, 2017			December 31, 2016			September 25, 2016
Derivatives not designated as hedging instruments:
Interest rate swaps	$	(14,849	)	$	(17,721	)	$	(30,185	)

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 amended interest rate swap agreements are not designated as hedging instruments. As of September 24, 2017, the Partnership has 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 31, 2018 maturity. As of September 24, 2017, approximately $11.8 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 months ended September 24, 2017 and September 25, 2016:

(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 9/24/2017		Three months ended 9/25/2016		Designated Derivatives	Three months ended 9/24/2017		Three months ended 9/25/2016		Derivatives Not Designated	Three months ended 9/24/2017		Three months ended 9/25/2016
Interest rate swaps	$	—	$	—	Interest Expense	$	—	$	—	Net effect of swaps	$	3,318	$	715

During the quarter ended September 24, 2017, the Partnership recognized $3.3 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 benefit to earnings of $1.0 million recorded in “Net effect of swaps.”

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 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.”

The following table summarizes the effect of derivative instruments on income and other comprehensive income for the nine months ended September 24, 2017 and September 25, 2016:

(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 9/24/2017		Nine months ended 9/25/2016			Designated Derivatives	Nine months ended 9/24/2017		Nine months ended 9/25/2016			Derivatives Not Designated	Nine months ended 9/24/2017		Nine months ended 9/25/2016
Interest rate swaps	$	—	$	(4,671	)	Interest Expense	$	—	$	(851	)	Net effect of swaps	$	3,378	$	(2,596	)

During the nine-month period ended September 24, 2017, the Partnership recognized $3.4 million of gains on the derivatives not designated as cash flow hedges and $7.1 million of expense representing the regular amortization of amounts in AOCI. The effect of these amounts resulted in a charge to earnings of $3.7 million recorded in “Net effect of swaps.”

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 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.”