Derivative Instruments and Hedging Activities

6 Months Ended

Apr. 02, 2016

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

NOTE 9 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our currency exchange contracts are designated as cash flow hedges and qualify as hedging instruments. We also have derivatives that 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:

	April 2, 2016
		Prepaid Expenses
		and Other		Other Accrued
(in thousands)		Current Assets		Liabilities
Designated hedge derivatives
Foreign exchange cash flow hedges	$	188	$	956
Derivatives not designated as hedges
Foreign exchange balance sheet derivatives		-		409
Total hedge and other derivatives	$	188	$	1,365

	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

A  reconciliation of the net fair value of foreign exchange cash flow hedge assets and liabilities subject to master netting arrangements recorded in the April 2, 2016 and October 3, 2015 Consolidated Balance Sheets to the net fair value that could have been reported in the respective Consolidated Balance Sheets are as follows:

	Gross		Gross		Net		Derivatives		Cash
	Recognized		Offset		Amount		Subject to		Collateral		Net
(in thousands)	Amount		Amount		Presented		Offset		Received		Amount1
April 2, 2016
Assets	$	188	$	-	$	188	$	(188)	$	-	$	-
Liabilities		956		-		956		(188)		-		768
October 3, 2015
Assets	$	841	$	-	$	841	$	-	$	-	$	841
Liabilities		353		-		353		-		-		353

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 (loss) (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.

As ofApril 2, 2016 and October 3, 2015, we had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $35,964 and $48,529, 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 $33,644 and$41,696 as ofApril 2, 2016 and October 3, 2015,  respectively. As of April 2, 2016, the net market value of the foreign currency exchange contracts was a net liability of $768, consisting of $956 in liabilities and $188 inassets. As ofOctober 3, 2015, the net market value of the foreign currency exchange contracts was a net asset of $488, consistingof $841 in assets and $353 in liabilities.

The pretax amounts recognized in AOCI on currency exchange contracts, including (gains) losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (loss) (OCI), are as follows:

	Three Months Ended				Six Months Ended
		April 2,		March 28,		April 2,		March 28,
(in thousands)		2016		2015		2016		2015
Beginning unrealized net gain (loss) in AOCI	$	669	$	1,978	$	608	$	1,414
Net (gain) loss reclassified into revenue (effective portion)		132		(1,095)		(18)		(2,793)
Net gain (loss) recognized in OCI (effective portion)		(1,136)		869		(925)		3,131
Ending unrealized net gain (loss) in AOCI	$	(335)	$	1,752	$	(335)	$	1,752

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $1 in both of the three and six months ended April 2, 2016 and March 28, 2015. As of April 2, 2016 and March 28, 2015, the amount projected to be reclassified from AOCI into earnings in the next twelve months was a net lossof $213 and a net gain of$1,848, respectively. The maximum remaining maturity of any forward or optional contract as of April 2, 2016 and March 28, 2015was 1.2 and2.2 years, respectively.

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 income (expense), net on the Consolidated Statements of Income.

As of April 2, 2016 and October 3, 2015,  wehad outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $70,751 and $66,701, 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 as of April 2, 2016 and October 3, 2015was $15,359 and$17,122, respectively. As of April 2, 2016 and October 3, 2015, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of $409 and $286, respectively.

The net gain (loss) recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts were as follows:

	Three Months Ended				Six Months Ended
		April 2,		March 28,		April 2,		March 28,
(in thousands)		2016		2015		2016		2015
Net (loss) gain recognized in other (expense) income, net	$	(743)	$	535	$	(834)	$	873