Derivative Financial Instruments

6 Months Ended

Mar. 30, 2014

Derivative Financial Instruments

Derivative Financial Instruments

13.          Derivative Financial Instruments

We use certain interest rate derivative contracts to hedge interest rate exposures on our variable rate debt. We have also entered into foreign currency derivative contracts with financial institutions to reduce the risk that cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations.  Our hedging program is not designated for trading or speculative purposes.

We recognize derivative instruments as either assets or liabilities on the accompanying condensed consolidated balance sheets at fair value.  We record changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as accounting hedges in our condensed consolidated balance sheets as accumulated other comprehensive income.

In fiscal 2013, we entered into three interest rate swap agreements that we designated as cash flow hedges to fix the variable interest rates on a portion of borrowings under our term loan facility.  In the first quarter of fiscal 2014, we entered into two additional interest rate swap agreements that we designated as cash flow hedges to fix the variable interest rates on the balance of the term loan facility.  At March 30, 2014, the effective portion of our interest rate swap agreements designated as cash flow hedges before tax effect was immaterial, all of which we expect to reclassify from accumulated other comprehensive income to interest expense within the next 12 months.

As of March 30, 2014, the notional principal, fixed rates and related expiration dates of our outstanding interest rate swap agreements are as follows:

Notional Amount (in thousands)		FixedRate	ExpirationDate
$	51,250	1.36%	May 2018
51,250		1.34%	May 2018
51,250		1.35%	May 2018
25,625		1.23%	May 2018
25,625		1.24%	May 2018

The fair values of our outstanding derivatives designated as hedging instruments are as follows:

	Balance Sheet Location	March 30, 2014		September 29, 2013
		(in thousands)
Interest rate swap agreements	Other current liabilities	$	257	$	987

The impact of the effective portions of derivative instruments in cash flow hedging relationships on income and other comprehensive income from our interest rate swap agreements was immaterial for the first six months of fiscal 2014 and the fiscal year ended September 29, 2013. Additionally, there were no ineffective portions of derivative instruments.  Accordingly, no amounts were excluded from effectiveness testing for our interest rate swap agreements.  We had no derivative instruments that were not designated as hedging instruments for fiscal 2013 and the first half of fiscal 2014.