DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Mar. 29, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Risk Management

The Company uses an interest rate swap agreement to manage its exposure to changes in interest rates of the Company’s variable rate debt. The swap agreement is recorded in the consolidated balance sheet at fair value. Changes in the fair value of the swap agreements are recorded in net income or other comprehensive income/(loss), based on whether the agreements are designated as part of a hedge transaction and whether the agreements are effective in offsetting the change in the value of the future interest payments attributable to the underlying portion of the Company’s variable rate debt. Interest payments accrued each reporting period for the interest rate swap are recognized in interest expense.

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T entered into an interest rate swap arrangement (“Swap Transaction”). The Swap Transaction is for a notional amount of $14,000,000 with an effective date of February 1, 2013 and a termination date of February 1, 2023. The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on outstanding principal of Term Loan B. Pursuant to the interest rate swap, the Company’s one month LIBOR rate is swapped for a fixed rate of 1.32%. When the swap fixed rate is added to the Term Loan B Spread of 2.50%, the Company’s interest rate applicable to Term Loan B is effectively fixed at 3.82%.

The fair value of the interest rate swap agreement represented a liability of $0.04 million as of March 29, 2013 and was estimated based on Level 2 inputs. The Company did not designate the swap as a cash flow hedge at inception and therefore, the gains or losses from the changes in fair value of the derivative instrument are recognized in earnings for the period ended March 29, 2013 within interest expense.

The fair value of the interest rate swap recorded in other long-term liabilities in the consolidated balance sheet as of March 29, 2013 is $0.04 million.