Derivative Financial Instruments

9 Months Ended

Mar. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

In the ordinary course of business, we are exposed to market risks. We utilize derivative financial instruments to manage interest rate risk and manage the total debt that is subject to variable and fixed interest rates. These interest rate swap contracts modify our exposure to interest rate risk by converting variable rate debt to a fixed rate or by locking in the benchmark interest rate on forecasted issuances of fixed rate debt without an exchange of the underlying principal amount. We designate interest rate swap contracts as cash flow hedges of the interest expense related to variable and fixed rate debt.

All derivative financial instruments are recognized at fair value and are recorded in the “Other current assets” or “Accrued expenses” line items in the Condensed Consolidated Balance Sheets.

For derivative financial instruments that are designated and qualify as cash flow hedges, the effective portion of the change in fair value on the derivative financial instrument is reported as a component of “Accumulated other comprehensive income” and reclassified into the “Interest expense” line item in the Condensed Consolidated Statements of Operations in the same period as the expenses from the cash flows of the hedged items are recognized. Cash payments or receipts are included in “Net cash provided by operating activities” in the Condensed Consolidated Statements of Cash Flows in the same period as the cash is settled. We perform an assessment at the inception of the hedge and on a quarterly basis thereafter, to determine whether our derivatives are highly effective in offsetting changes in the value of the hedged items. Any change in the fair value resulting from hedge ineffectiveness is immediately recognized as income or expense.

We do not have any derivative financial instruments that have been designated as either a fair value hedge, a hedge of a net investment in a foreign operation, or that are held for trading or speculative purposes. Cash flows associated with derivative financial instruments are classified in the same category as the cash flows hedged in the Condensed Consolidated Statements of Cash Flows.

Approximately 34.7% of our outstanding variable rate debt had its interest payments modified using interest rate swap contracts at March 30, 2013.

During the three month period ended March 30, 2013, we terminated $70.0 million of interest rate swap contracts that had been utilized to lock in the benchmark interest rate on a forecasted issuance of fixed rate debt. The termination of the interest rate swap coincided with the formal agreement of the fixed rate of interest that would be paid on the forecasted debt issuance with prospective borrowers. During the three and nine month periods endedMarch 30, 2013, we recognized gains of $1.3 million and $1.7 million, respectively, in accumulated other comprehensive income related to the $70.0 million of interest rate swap agreements. These amounts will be reclassified into interest expense in the same periods as the expenses from the cash flows on the forecasted debt issuance. See Note 16, “Subsequent Event” of the Notes to the Condensed Consolidated Financial Statements for additional information on the forecasted debt issuance.

As of March 30, 2013 and June 30, 2012, we had $1.4 million and $1.4 million, respectively, of liabilities on interest rate swap contracts that are classified as “Accrued expenses” in the Condensed Consolidated Balance Sheets. Of the $0.8 million net gain deferred in accumulated other comprehensive income as of March 30, 2013, a $0.3 million net loss is expected to be reclassified to interest expense in the next twelve months.

As of March 30, 2013 and June 30, 2012, all derivative financial instruments were designated as hedging instruments.

As of March 30, 2013, we had interest rate swap contracts to pay fixed rates of interest and to receive variable rates of interest based on the three-month London Interbank Offered Rate (“LIBOR”) on $90.0 million notional amount, $25.0 million of which are forward starting interest rate swap contracts. Of the $90.0 million notional amount, $15.0 million matures in the next 12 months and $75.0 million matures in 25-36 months. The average rate on the $90.0 million of interest rate swap contracts was 1.61% as of March 30, 2013. These interest rate swap contracts are highly effective cash flow hedges and accordingly, gains or losses on any ineffectiveness were not material to any period.

The following tables summarize the amount of gain or loss recognized in accumulated other comprehensive income or loss and the classification and amount of gains or losses reclassified from accumulated other comprehensive income or loss into the Condensed Consolidated Statements of Operations for the three and nine months endedMarch 30, 2013 and March 31, 2012 related to derivative financial instruments used in cash flow hedging relationships:

Relationship:	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)
	Three Months Ended					Nine Months Ended
	March 30, 2013		March 31, 2012			March 30, 2013		March 31, 2012
Interest rate swap contracts	$	1.3	$	(0.1	)	$	1.4	$	(0.2	)
Total derivatives designated as cash flow hedging instruments	$	1.3	$	(0.1	)	$	1.4	$	(0.2	)

Relationship:	Statement of Operations Classification:	Amount of Loss Reclassified From Accumulated Other Comprehensive Income (Loss) to Consolidated Statements of Operations
		Three Months Ended						Nine Months Ended
		March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
Interest rate swap contracts	Interest expense	$	(0.1	)	$	(0.2	)	$	(0.3	)	$	(0.8	)
Total derivatives designated as cash flow hedging instruments		$	(0.1	)	$	(0.2	)	$	(0.3	)	$	(0.8	)