Derivatives and Risk Management
|3 Months Ended|
Mar. 30, 2017
|Derivatives and Risk Management|
|Derivatives and Risk Management||
3. Derivatives and Risk Management
Changes in interest rates impact our results of operations. In an effort to manage our exposure to this risk, we enter into derivative contracts and may adjust our derivative portfolio as market conditions change.
Interest Rate Risk
Our exposure to market risk from adverse changes in interest rates is primarily associated with our long‑term debt obligations, which carry variable interest rates. Market risk associated with our variable interest rate long‑term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.
In an effort to manage our exposure to the risk associated with our variable interest rate long‑term debt, we periodically enter into interest rate derivative contracts. We designate interest rate derivative contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a capped rate as cash flow hedges.
Hedge Position as of March 30, 2017:
Hedge Position as of December 29, 2016:
Designated Hedge Gains (Losses)
Gains (losses) related to our designated hedge contracts are as follows:
To manage credit risk associated with our interest rate hedging program, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.
The counterparties to our derivative contracts are financial institutions with investment grade credit ratings. To manage our credit risk related to our derivative financial instruments, we periodically monitor the credit risk of our counterparties, limit our exposure in the aggregate and to any single counterparty, and adjust our hedging position, as appropriate. The impact of credit risk, as well as the ability of each party to fulfill its obligations under our derivative financial instruments, is considered in determining the fair value of the contracts. Credit risk has not had a significant effect on the fair value of our derivative contracts. We do not have any credit risk‑related contingent features or collateral requirements with our derivative financial instruments.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef