NOTE 5 - DERIVATIVES AND FAIR VALUE MEASUREMENTS

All derivatives are recognized in the accompanying Condensed Consolidated Balance Sheets at their estimated fair values. On the date a derivative contract is entered into, the Company designates the derivative as a hedge of a recognized asset or liability (a "fair value" hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (a "cash flow" hedge), or a hedge of the net investment in a foreign operation. The Company currently has cash flow hedges related to variable rate debt and forecasted foreign currency payments. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of the derivatives that qualify as cash flow hedges are recorded in "Accumulated other comprehensive income" in the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of the cash flows.

During the fiscal second quarter of 2011, the Company entered into forward exchange contracts to fix the exchange rates on foreign currency cash used to pay for capital expenditures related to the construction of our fourth facility in Malaysia. Changes in the fair value of the forward contracts are recorded in "Accumulated other comprehensive income" on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. As of July 2, 2011, the total notional value of the forward contracts was $8.4 million and the total fair value of these forward contracts was $0.2 million.

During the fiscal second quarter of 2011, the Company entered into two separate treasury rate lock contracts to hedge the variability of the fixed interest rate on the then forecasted issuance of $175 million of fixed rate debt using a treasury lock transaction. The fixed interest rates for each of these contracts were 2.77% and 2.72%, respectively, with a notional value of $150 million. On April 4, 2011, the Company entered into a final treasury rate lock transaction for the remaining $25 million of exposure at a rate of 2.88%. On April 8, 2011, when the fixed interest rate for the debt issuance was determined, all three treasury rate lock contracts were settled and the Company received proceeds of $2.3 million, which will be amortized over the seven year term of the related debt.

In June 2008, the Company entered into three interest rate swap contracts related to the $150 million in term loans under the Credit Facility that had an initial total notional value of $150 million and mature on April 4, 2013. These interest rate swap contracts will pay the Company variable interest at the three month LIBOR rate, and the Company will pay the counterparties a fixed interest rate. The fixed interest rates for each of these contracts are 4.415%, 4.490% and 4.435%, respectively. These interest rate swap contracts were entered into to convert $150 million of the variable rate term loan under the Credit Facility into fixed rate debt. Based on the terms of the interest rate swap contracts and the underlying debt, these interest rate contracts were determined to be effective, and thus qualify as a cash flow hedge. As such, any changes in the fair value of these interest rate swaps are recorded in "Accumulated other comprehensive income" on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. The total fair value of these interest rate swap contracts was $6.2 million as of July 2, 2011. As of July 2, 2011, the total remaining combined notional amount of the Company's three interest rate swaps was $101.3 million.

The Company's Malaysian operations have entered into forward exchange contracts on a rolling basis with a total notional value of $50.0 million as of July 2, 2011. These forward contracts will fix the exchange rates on foreign currency cash used to pay a portion of local currency expenses. Changes in the fair value of the forward contracts are recorded in "Accumulated other comprehensive income" on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. The total fair value of these forward contracts was $1.6 million as of July 2, 2011.

The tables below present information regarding the fair values of derivative instruments (as defined in Note 1 – Basis of Presentation and Accounting Policies) and the effects of derivative instruments on the Company's Condensed Consolidated Statements of Operations:


Fair Values of Derivative Instruments
In thousands of dollars
	Asset Derivatives			Liability Derivatives
		July 2, 2011	October 2, 2010		July 2, 2011	October 2, 2010
Derivatives designated as hedging instruments	Balance Sheet Location	Fair Value	Fair Value	Balance Sheet Location	Fair Value	Fair Value
Interest rate swaps		-	-	Current liabilities – Other	$3,516	$3,616
Interest rate swaps		-	-	Other liabilities	$2,637	$5,423
Forward contracts	Prepaid expenses and other	$1,550	$ 2,612		-	-
Forward contracts	Prepaid expenses and other	$ 196	-		-	-


The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations for the Nine Months Ended
In thousands of dollars
Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	July 2, 2011	July 3, 2010		July 2, 2011	July 3, 2010		July 2, 2011	July 3, 2010

Interest rate swaps	$ (420)	$ (3,160)	Interest income (expense)	$ (3,306)	$ (3,715)	Other income (expense)	$ -	$ -
Forward contracts	$ 2,108	$ 2,447	Selling and administrative expenses	$ 2,848	$ 1,150	Other income (expense)	$ -	$ -
Treasury rate locks	$ 2,281	$ -	Interest income (expense)	$ 43	$ -	Other income (expense)	$ -	$ -


The Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations for the Three Months Ended
In thousands of dollars
Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	July 2, 2011	July 3, 2010		July 2, 2011	July 3, 2010		July 2, 2011	July 3, 2010

Interest rate swaps	$ (676)	$ (1,817)	Interest income (expense)	$ (1,085)	$ (1,160)	Other income (expense)	$ -	$ -
Forward contracts	$ 695	$ 579	Selling and administrative expenses	$ 953	$ 749	Other income (expense)	$ -	$ -
Treasury rate locks	$ 869	$ -	Interest income (expense)	$ 43	$ -	Other income (expense)	$ -	$ -

The following table lists the fair values of the Company's derivatives as of July 2, 2011, by input level as defined in Note 1 – Basis of Presentation and Accounting Policies:

The fair value of interest rate swaps and foreign currency forward contracts is determined using a market approach which includes obtaining directly or indirectly observable values from third parties active in the relevant markets. The primary input in the fair value of the interest rate swaps is the relevant LIBOR forward curve. Inputs in the fair value of the foreign currency forward contracts include prevailing forward and spot prices for currency and interest rate forward curves.