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DERIVATIVE FINANCIAL INSTRUMENTS
 3 Months Ended
Sep. 29, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company has entered into foreign currency forward contracts which are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the same period in which the underlying hedged transaction affects earnings. The derivative’s effectiveness represents the change in fair value of the hedge that offsets the change in fair value of the hedged item.
The Company transacts business in Mexico and is subject to the risk of foreign currency exchange rate fluctuations. The Company enters into foreign currency forward contracts to manage the foreign currency fluctuations for Mexican peso denominated payroll, utility, tax, and other local expenses. The foreign currency forward contracts have terms that were effective to the underlying transactions being hedged.
As of September 29, 2012, the Company had outstanding foreign currency forward contracts with a total notional amount of $52.2 million. These contract maturity dates extend through March 2015. The Company did not enter into any foreign currency forward contracts during the three months ended September 29, 2012. However, the Company settled $5.5 million of foreign currency forward contracts during the three months ended September 29, 2012. For the three months ended October 1, 2011, the Company entered into foreign currency forward contracts of $8.6 million and settled $4.2 million of such contracts.
Subsequent to September 29, 2012, the Company entered into $10.6 million of forward contracts that extended our hedge position through September 2015.
The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheets as of September 29, 2012 and June 30, 2012 (in thousands):
 
 
 
 
September 29, 2012
 
June 30, 2012
Derivatives Designated as Hedging Instruments
Balance Sheet Location
 
Fair Value
 
Fair Value
Foreign currency forward contracts
Other current assets
 
$
171

 
$
199

Foreign currency forward contracts
Other long-term assets
 
$
1,335

 
$
659

Foreign currency forward contracts
Other current liabilities
 
$
(435
)
 
$
(923
)
Foreign currency forward contracts
Other long-term liabilities
 
$
(197
)
 
$
(928
)

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended September 29, 2012 and October 1, 2011, respectively (in thousands):
 
Derivatives Designated as Hedging Instruments
AOCI Balance
as of
June 30, 2012
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Cost of  Sales
 
AOCI Balance
as of
September 29,
2012
Settled foreign currency forward contracts for the three months ended September 29, 2012
$
118

 
$
153

 
$
(271
)
 
$
—

Unsettled foreign currency forward contracts
(777
)
 
1,350

 
—

 
573

Total
$
(659
)
 
$
1,503

 
$
(271
)
 
$
573

 
 
 
 
 
 
 
 
Derivatives Designated as Hedging Instruments
AOCI Balance
as of
July 2,
2011
 
Effective
Portion
Recorded In
AOCI
 
Effective Portion
Reclassified From
AOCI Into
Cost of  Sales
 
AOCI Balance
as of October 1,
2011
Settled foreign currency forward contracts for the three months ended October 1, 2011
$
268

 
$
(47
)
 
$
(221
)
 
$
—

Unsettled foreign currency forward contracts
1,472

 
(4,045
)
 
—

 
(2,573
)
Total
$
1,740

 
$
(4,092
)
 
$
(221
)
 
$
(2,573
)


 
 
 
 
 
 
 
 
The Company does not enter into derivative instruments for trading or speculative purposes. The Company’s counterparties to the foreign currency forward contracts are major financial institutions. These institutions do not require collateral for the contracts and the Company believes that the risk of the counterparties failing to meet their contractual obligations is remote. As of September 29, 2012, the net amount of unrealized loss expected to be reclassified into earnings within the next 12 months is approximately $(0.2) million.
As of September 29, 2012, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.