Derivative Instruments and Hedging Activities

12 Months Ended

Oct. 03, 2015

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

NOTE 5DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our currency exchange and interest rate swaps are designated as cash flow hedges and qualify as hedging instruments. We also have derivatives which are not designated as cash flow hedges and, therefore, are accounted for and reported under foreign currency guidance. Regardless of designation for accounting purposes, we believe all of our derivative instruments are hedges of transactional risk exposures. The fair value of our outstanding designated and undesignated derivative assets and liabilities are reported in the Consolidated Balance Sheets as follows:

		October 3, 2015
		Prepaid Expenses
		and Other		Other Accrued
(in thousands)		Current Assets		Liabilities
Designated hedge derivatives
Foreign exchange cash flow hedges	$	841	$	353
Derivatives not designated as hedges
Foreign exchange balance sheet derivatives		-		286
Total hedge and other derivatives	$	841	$	639
		September 27, 2014
		Prepaid Expenses
		and Other		Other Accrued
(in thousands)		Current Assets		Liabilities
Designated hedge derivatives
Foreign exchange cash flow hedges	$	1,750	$	178
Derivatives not designated as hedges
Foreign exchange balance sheet derivatives		641		-
Total hedge and other derivatives	$	2,391	$	178

A reconciliation of the net fair value of foreign exchange cash flow hedge assets and liabilities subject to master netting arrangements that are recorded in the October 3, 2015 and September 27, 2014 Consolidated Balance Sheets to the net fair value that could have been reported in the respective Consolidated Balance Sheet is as follows:

	Gross		Gross		Net		Derivatives		Cash
	Recognized		Offset		Amount		Subject to		Collateral		Net
(in thousands)	Amount		Amount		Presented		Offset		Received		Amount1
October 3, 2015
Assets	$	841	$	-	$	841	$	-	$	-	$	841
Liabilities		353		-		353		-		-		353
September 27, 2014
Assets	$	1,750	$	-	$	1,750	$	-	$	-	$	1,750
Liabilities		178		-		178		-		-		178

1        Net fair value of foreign exchange cash flow hedge assets / liabilities that could have been reported in the Consolidated Balance Sheet.

Cash Flow Hedging – Currency Risks

Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Qualifying gains and losses related to changes in the market value of these contracts are reported as a component of accumulated other comprehensive income (AOCI) within shareholders’ equity on the Consolidated Balance Sheets and reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effective portion of the cash flow hedges represents the change in fair value of the hedge that offsets the change in the functional currency value of the hedged item. We periodically assess whether our currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, we discontinue hedge accounting prospectively. Subsequent changes in the market value of ineffective currency exchange contracts are recognized as an increase or decrease in revenue on the Consolidated Statements of Income as that is the same line item in which the underlying hedged transaction is reported.

At October 3, 2015 and September 27, 2014, we had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $48,529 and $46,763, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding was $41,696 and $39,608 at October 3, 2015 and September 27, 2014, respectively. At October 3, 2015, the net market value of the foreign currency exchange contracts was a net asset of $488, consisting of $841 in assets and $353 in liabilities. At September 27, 2014, the net market value of the foreign currency exchange contracts was a net asset of $1,572, consisting of $1,750 in assets and $178 in liabilities.

The pretax amounts recognized in AOCI on currency exchange contracts for the fiscal years ended October 3, 2015 and September 27, 2014, including (gains)  losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (OCI), are as follows:

(in thousands)		2015		2014
Beginning unrealized net gain (loss) in AOCI	$	1,415	$	754
Net (gain) loss reclassified into revenue (effective portion)		(4,299)		(1,088)
Net gain (loss) recognized in OCI (effective portion)		3,492		1,749
Ending unrealized net gain (loss) in AOCI	$	608	$	1,415

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $1 in each of the fiscal years ended October 3, 2015, September 27, 2014 and September 28, 2013. At October 3, 2015, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $700. The maximum remaining maturity of any forward or optional contract at October 3, 2015 was 1.7 years.

Foreign Currency Balance Sheet Derivatives

We also use foreign currency derivative contracts to maintain the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these derivative contracts are included in other (expense) income, net on the Consolidated Statements of Income.

At October 3, 2015 and September 27, 2014, we had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $66,701 and $58,271, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding at October 3, 2015 and September 27, 2014 was $17,122 and $12,225, respectively. At October 3, 2015 and September 27, 2014, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of $286 and a net asset of $641, respectively.

The net losses recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts for fiscal years 2015, 2014 and 2013 are as follows:

(in thousands)		2015		2014		2013
Net gain (loss) recognized in other (expense) income, net	$	582	$	1,267	$	(258)