DERIVATIVES FINANCIAL INSTRUMENTS (Notes)

3 Months Ended

Jan. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars. However, a significant amount of the Company’s operating expenses are denominated in local currencies, primarily in Singapore.

The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow hedge accounting designation to hedge exposures to the variability in the U.S.-dollar equivalent of forecasted non-U.S.-dollar-denominated operating expenses. These instruments generally mature within 6 months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the consolidated statements of income as the impact of the hedged transaction.

There were no outstanding derivative instruments as of October 3, 2015. The fair value of derivative instruments on our Consolidated Balance Sheet as of January 2, 2016 was as follows:

	As of
(in thousands)	January 2, 2016
	Notional Amount		Fair Value Liability Derivatives(1)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts (2)	$	7,937	$	98
Total derivatives	$	7,937	$	98

(1) The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Balance Sheet.

(2) Hedged amounts expected to be recognized to income within the next twelve months.

The effects of derivative instruments designated as cash flow hedges in our Consolidated Statements of Income for the three months ended January 2, 2016 and December 27, 2014 are as follows:

(in thousands)	Three months ended
	January 2, 2016			December 27, 2014
Foreign exchange forward contract in cash flow hedging relationships:
Net loss recognized in OCI, net of tax(1)	$	(187	)	$	(640	)
Net loss reclassified from accumulated OCI into income, net of tax(2)	$	(89	)	$	(249	)
Net gain recognized in income(3)	$	—		$	—

(1)Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).

(2)Effective portion classified as selling, general and administrative expense.

(3)Ineffective portion and amount excluded from effectiveness testing classified in selling, general and administrative expense.