Note 17 - Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

9 Months Ended

Mar. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

17. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Financial Instruments

The Company uses derivative financial instruments, such as foreign currency contracts or interest rate swaps, to reduce 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.

Foreign currency contracts

The Company enters into foreign currency contracts as economic hedges for exposures related to certain sales, inventory purchases and equipment purchases that are denominated in currencies that are not its functional currency. As of March 30, 2014, the latest maturity date for all outstanding foreign currency contracts is during July 2014. 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 included in other operating expense, net resulting from the underlying exposures of the foreign currency denominated assets and liabilities.

Interest rate swap

On May 18, 2012, the Company entered into a five year, $50,000 interest rate swap with Wells Fargo to provide a hedge against the variability of cash flows related to LIBOR-based variable rate borrowings under the Company’s ABL Revolver and ABL Term Loan. The swap increased to $85,000 in May 2013 and began decreasing $5,000 per quarter in August 2013 and will continue to do so until the balance again reaches $50,000 in February 2015, where it will remain through the life of the instrument. This interest rate swap allows the Company to fix LIBOR at 1.06% and terminates on May 24, 2017.

On November 26, 2012, the Company de-designated this interest rate swap as a cash flow hedge. For the year-to-date period ended March 30, 2014, the Company reclassified pre-tax unrealized losses of $433 from accumulated other comprehensive loss to interest expense; the Company expects to reclassify additional losses of $386 during the next twelve months.

Contingent consideration

On December 2, 2013, the Company acquired certain assets in a business combination with Dillon and recorded a contingent consideration liability, as described in “Note 4. Acquisition.” The fair value of the contingent consideration is measured at each reporting period using a discounted cash flow methodology based on inputs not observable in the market (Level 3 classification in the fair value hierarchy) and any change in the fair value from either the passage of time or events occurring after the acquisition date is recorded in other operating expense, net in the consolidated statements of income. As of March 30, 2014, the inputs and assumptions used to develop the fair value measurement have not changed since the acquisition date.

A reconciliation of the changes in the fair value follows:

Contingent consideration as of December 29, 2013	$	2,500
Change in fair value		98
Payment		(11	)
Contingent consideration as of March 30, 2014	$	2,587

Based on the present value of the expected future payments, the Company has recorded a liability of $562 in accrued expenses and $2,025 in other long-term liabilities.

The Company’s financial assets and liabilities accounted for at fair value on a recurring basis, and the level within the fair value hierarchy used to measure these items, are as follows:

As of March 30, 2014	Notional Amount			USD Equivalent			Balance Sheet Location	Fair Value Hierarchy	Fair Value
Foreign currency contracts	MXN		1,200		$	91	Accrued expenses	Level 2	$	(1	)
Foreign currency contracts	EUR		495		$	667	Other current assets	Level 2	$	14
Interest rate swap	USD	$	70,000		$	70,000	Other long-term liabilities	Level 2	$	(217	)
Contingent consideration							Accrued expenses and other long-term liabilities	Level 3	$	(2,587	)

As of June 30, 2013	Notional Amount			USD Equivalent		Balance Sheet Location	Fair Value  Hierarchy		Fair Value
Foreign currency contracts	MXN		3,800	$	295	Other current assets	Level 2	$	3
Interest rate swap	USD	$	85,000	$	85,000	Other long-term liabilities	Level 2	$	(324	)

(MXN represents the Mexican Peso; EUR represents the Euro)

Estimates of the fair value of the Company’s foreign currency contracts and interest rate swaps are obtained from 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
Derivatives not designated as hedges	Classification	March 30, 2014			March 24, 2013
Foreign currency contracts	Other operating expense, net	$	3		$	15
Interest rate swap	Interest expense		(99	)		(103	)
Total gain recognized in income		$	(96	)	$	(88	)

		For the Nine Months Ended
Derivatives not designated as hedges	Classification	March 30, 2014			March 24, 2013
Foreign currency contracts	Other operating expense, net	$	(19	)	$	53
Interest rate swap	Interest expense		(107	)		(177	)
Total gain recognized in income		$	(126	)	$	(124	)

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.

Since its most recent debt refinancing and modification, the Company believes that there have been no significant changes to its credit risk profile or the interest rates available to the Company for debt issuances with similar terms and average maturities, and the Company estimates that the fair values of its long-term debt obligations approximate their carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate their fair value because of their short-term nature.

There were no transfers into or out of the levels of the fair value hierarchy for the periods ended March 30, 2014 or March 24, 2013.

Non-Financial Assets and Liabilities

The Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring basis.