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Interest Rate Swap (Notes)
 9 Months Ended
Sep. 24, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Interest Rate Swap:

On March 28, 2016, the Company entered into an interest rate swap agreement which became effective on March 31, 2016 with a maturity date of February 19, 2021. The interest rate swap was executed for risk management and is not held for trading purposes. The objective of the interest rate swap is to mitigate interest rate risk associated with future changes in interest rates. To accomplish this objective, the interest rate swap is intended to hedge the variable cash flows associated with the variable rate term loan borrowings under the 2016 Senior Credit Facility. The notional amount of the interest rate swap began at $197.5 million (the principal amount of the term loan borrowings as of March 31, 2016) and will amortize at the same time and in the same amount as the term loan borrowings as described in Note 5. As of September 24, 2016, the notional amount of the interest rate swap was $195.0 million. The interest rate swap entitles the Company to receive, at specified intervals, a variable rate of interest based on LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreement without exchange of the underlying notional amount.

The Company has designated this interest rate swap as a cash flow hedge and will account for the underlying activity in accordance with hedge accounting. The interest rate swap is presented within the consolidated balance sheets at fair value. In accordance with hedge accounting, the effective portion of gains and losses on interest rate swaps that are designated and qualify as cash flow hedges are recorded as a component of Other Comprehensive Income (“OCI”) and reclassified into earnings in the period during which the hedged transactions affect earnings. The ineffective portion of gains and losses on the interest rate swap, if any, are recognized in current earnings.

The liabilities measured at fair value related to the Company’s interest rate swap, excluding accrued interest, were as follows (in thousands):
 
Balance Sheet Location
 
September 24, 2016
 
December 26, 2015
 
September 26, 2015
Interest rate swap (short-term portion)
Other accrued expenses
 
$
887

 
$
—

 
$
—

Interest rate swap (long-term portion)
Other long-term liabilities
 
935

 
—

 
—

Total liabilities
 
 
$
1,822

 
$
—

 
$
—



The offset to the interest rate swap liability is recorded in Accumulated Other Comprehensive Loss (“AOCL”) (a component of equity), net of deferred taxes, and will be reclassified into earnings over the term of the underlying debt as interest payments are made.

The following table summarizes the changes in AOCL, net of tax, related to the Company’s interest rate swaps (in thousands):
 
 
September 24, 2016
 
December 26, 2015
 
September 26, 2015
Beginning fiscal year AOCL balance
 
$
—

 
$
—

 
$
—

Current fiscal period gain recognized in OCI
 
(1,111
)
 
—

 
—

Amounts reclassified from AOCL into current fiscal period earnings
 
—

 
—

 
—

Other comprehensive gain, net of tax
 
(1,111
)
 
—

 
—

Ending fiscal period AOCL balance
 
$
(1,111
)
 
$
—

 
$
—



As of September 24, 2016, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $0.9 million. Cash flows related to the interest rate swap are included in operating activities on the Condensed Consolidated Statements of Cash Flows.





The following table summarizes the impact of pre-tax gains and losses derived from the interest rate swap (in thousands):
 
 
 
Fiscal three months ended
 
Fiscal nine months ended
 
Financial Statement Location
 
September 24, 2016
 
September 26, 2015
 
September 24, 2016
 
September 26, 2015
Effective portion of gains and (losses) recognized in OCI during the period
Other comprehensive income (loss)
 
$
412

 
$
—

 
$
(1,822
)
 
$
—

Amounts reclassified from AOCL into earnings
Interest expense, net
 
—

 
—

 
—

 
—

Ineffective portion of gains and (losses) recognized in earnings during the period
Interest expense, net
 
306

 
—

 
—

 
—



The following table summarizes the impact of taxes affecting AOCL as a result of the interest rate swap (in thousands):
 
 
Fiscal three months ended
 
Fiscal nine months ended
 
 
September 24, 2016
 
September 26, 2015
 
September 24, 2016
 
September 26, 2015
Income tax expense (benefit) of interest rate swap on AOCL
 
$
161

 
$
—

 
$
(711
)
 
$
—



Credit-risk-related contingent features

In accordance with the underlying interest rate swap agreement, the Company could be declared in default on its interest rate swap obligations if repayment of the underlying indebtedness (i.e. - the Company’s term loan) is accelerated by the lender due to the Company's default on such indebtedness.

As of September 24, 2016, the interest rate swap is in a net liability position, which, including accrued interest, had a fair value of $1.9 million. If the Company had breached any of the provisions in the underlying agreement at September 24, 2016, it could have been required to post full collateral or settle its obligations under the interest rate swap agreement. However, as of September 24, 2016, the Company had not breached any of these provisions or posted any collateral related to the underlying interest rate swap agreement.