Note 19 - Derivative Instruments and Hedging Activities

3 Months Ended

Sep. 25, 2011

Derivative Instruments and Hedging Activities Disclosure [Text Block]

19.   Derivative Instruments and Hedging Activities

Following its established procedures and controls, the Company may use derivative financial instruments such as foreign currency forward contracts or interest rate swaps for purposes of reducing its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates.  The Company does not enter into derivative contracts for speculative purposes.

Interest rate swaps:

On February 15, 2011, the Company entered into a twenty-seven month, $25,000 interest rate swap with Bank of America, N.A. to provide a hedge against the variability of cash flows (monthly interest expense payments) on the first $25,000 of LIBOR-based variable rate borrowings under the Company’s revolving credit facility.  The interest rate swap allows the Company to fix the LIBOR rate at 1.39%.

On August 5, 2011, the Company completed the redemption of an aggregate principal amount of $10,000 of its 2014 notes at 102.875%. In connection with the redemption, the Company entered into a twenty-one month, $10,000 interest rate swap to provide a hedge against the variability of cash flows.  This interest rate swap allows the Company to fix the LIBOR rate at 0.75%.

The Company has designated these swaps as cash flow hedges and determined that the hedges have been and still are highly effective.  At September 25, 2011, the amount of loss recognized in accumulated other comprehensive income for the Company’s cash flow hedge derivative instruments was $486.  For the fiscal quarter ended September 25, 2011, the Company did not reclassify any gains (losses) from accumulated other comprehensive income to net income and does not expect to do so during the next twelve months.

Foreign currency forward contracts:

The Company enters into foreign currency forward contracts as economic hedges for exposures related to certain sales, inventory purchases and equipment purchases denominated in currencies that are not the functional currency of certain entities.  As of September 25, 2011, the latest maturity date for all outstanding foreign currency forward contracts is during November 2011.  These items are not designated as hedges by the Company and are marked to market each period and offset by the foreign exchange gains (losses) resulting from the underlying exposures of the foreign currency denominated assets and liabilities.

The fair values of derivative financial instruments were as follows:

As of September 25, 2011:		Notional Amount		USD Equivalent		Balance Sheet Location	Fair value
Foreign exchange contracts	MXN	$	3,100	$	253	Other current assets	$	28
Interest rate swaps	USD	$	35,000	$	35,000	Other long-term liabilities	$	(486	)

As of June 26, 2011:		Notional Amount		USD Equivalent		Balance Sheet Location	Fair value
Foreign exchange contracts	MXN	$	9,200	$	770	Accrued expenses	$	(2	)
Interest rate swaps	USD	$	25,000	$	25,000	Other long-term liabilities	$	(408	)

The fair values of the Company’s foreign exchange contracts and interest rate swaps are estimated by obtaining month-end market quotes for contracts with similar terms.

The effect of marked to market hedging derivative instruments was as follows:

		For the Three Months Ended
		September 25, 2011			September 26, 2010
Derivatives not designated as hedges:	Classification
Foreign exchange contracts – MXN/USD	Other operating (income) expense	$	(29	)	$	18
Foreign exchange contracts – EU/USD	Other operating (income) expense		—			(238	)
Total (gain) loss recognized in income		$	(29	)	$	(220	)

By entering into derivative instrument contracts, the Company exposes itself to counterparty credit risk.  The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting the amount of exposure to any single counterparty and regularly monitoring its market position with each counterparty.  The Company’s derivative instruments do not contain any credit-risk related contingent features.