Derivative Financial Instruments:

12 Months Ended

Jan. 03, 2012

Derivative Financial Instruments:

Derivative Financial Instruments:

8.     Derivative Financial Instruments:

During fiscal 2008 and 2007, we entered into several zero-cost interest rate collars that hedged interest rate variability on a portion of outstanding borrowings on our Facility.  During fiscal 2010 and 2009, in conjunction with repayments on our Facility, we unwound our derivatives at a cost of $7.4 million in each year.  We had no derivative instruments outstanding at January 3, 2012 or December 28, 2010.  See Note 7 for further discussion of our long-term debt.

These derivatives qualified for hedge accounting as cash flow hedges and, accordingly, were recognized at fair value as either assets or liabilities on the consolidated balance sheets.  Changes in fair value were recorded in accumulated other comprehensive income (“AOCI”) and subsequently reclassified into earnings when the related interest expense on the underlying borrowing was recognized.

Changes in the fair value of our interest rate collars were expected to be perfectly effective in offsetting the variability in interest payments attributable to fluctuations in three-month LIBOR rates above the cap rates and below the floor rates specified in the respective agreements.  If, at any time, we determined an interest rate collar to be ineffective, in whole or in part, due to modifications in the interest rate collar or the underlying credit facility, prospective changes in fair value of the portion of the derivative determined to be ineffective would have been recognized as a gain or loss in the consolidated statements of operations.

The effect of derivative instruments on our consolidated statements of operations was as follows (in thousands):

	Gain Recognized in AOCI on Derivatives				Location of Loss	Loss Reclassified from AOCI into Income (1)
	Fiscal Year				Reclassified from AOCI	Fiscal Year
	2011		2010		into Income	2011		2010
Interest rate contracts	$	—	$	41	Interest expense	$	—	$	(9,638	)

(1) Loss reclassified from AOCI into income during fiscal 2010 included $7.4 million of expense to unwind our interest rate collars.