Derivative Instruments and Hedging Activities

12 Months Ended

Oct. 01, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our currency exchange and interest rate swaps are designated as cash flow hedges and qualify as hedging instruments. We also have derivatives which are not designated as cash flow hedges and, therefore, are accounted for and reported under foreign currency guidance. Regardless of designation for accounting purposes, we believe all of our derivative instruments are hedges of transactional risk exposures. The fair value of our outstanding designated and undesignated derivative assets and liabilities are reported in the Consolidated Balance Sheets as follows:

	October 1, 2016
(in thousands)	Prepaid Expenses and Other Current Assets		Other Accrued Liabilities
Designated hedge derivatives
Cash flow derivatives	$	149	$	633
Hedge derivatives not designated
Balance sheet derivatives	—		78
Total hedge derivatives	$	149	$	711

	October 3, 2015
(in thousands)	Prepaid Expenses and Other Current Assets		Other Accrued Liabilities
Designated hedge derivatives
Cash flow derivatives	$	841	$	353
Hedge derivatives not designated
Balance sheet derivatives	—		286
Total hedge derivatives	$	841	$	639

A reconciliation of the net fair value of foreign exchange cash flow hedge assets and liabilities subject to master netting arrangements that are recorded in the October 1, 2016 and October 3, 2015 Consolidated Balance Sheets to the net fair value that could have been reported in the respective Consolidated Balance Sheets are as follows:

(in thousands)	Gross Recognized Amount		Gross Offset Amount		Net Amount Presented		Derivatives Subject to Offset			Cash Collateral Received		Net Amount1
October 1, 2016
Assets	$	149	$	—	$	149	$	(147	)	$	—	$	2
Liabilities	633		—		633		(147		)	—		486
October 3, 2015
Assets	$	841	$	—	$	841	$	—		$	—	$	841
Liabilities	353		—		353		—			—		353

¹  Net fair value of foreign exchange cash flow hedge assets / liabilities that could have been reported in the Consolidated Balance Sheets.

Cash Flow Hedging – Currency Risks

Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Qualifying gains and losses related to changes in the market value of these contracts are reported as a component of accumulated other comprehensive income (loss) (AOCI) within shareholders’ equity on the Consolidated Balance Sheets and reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effective portion of the cash flow hedges represents the change in fair value of the hedge that offsets the change in the functional currency value of the hedged item. We periodically assess whether our currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, we discontinue hedge accounting prospectively. Subsequent changes in the market value of ineffective currency exchange contracts are recognized as an increase or decrease in revenue on the Consolidated Statements of Income as that is the same line item in which the underlying hedged transaction is reported.

As of October 1, 2016 and October 3, 2015, we had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $29,092 and $48,529, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding was $24,884 and $41,696 at October 1, 2016 and October 3, 2015, respectively. As of October 1, 2016, the net market value of the foreign currency exchange contracts was a net liability of $484, consisting of $149 in assets and $633 in liabilities. As of October 3, 2015, the net market value of the foreign currency exchange contracts was a net asset of $488, consisting of $841 in assets and $353 in liabilities.

The pretax amounts recognized in AOCI on currency exchange contracts for the fiscal years ended October 1, 2016 and October 3, 2015, including (gains) losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (OCI), are as follows:

(in thousands)	2016			2015
Beginning unrealized net gain in AOCI	$	608		$	1,415
Net loss (gain) reclassified into revenue (effective portion)	334			(4,299		)
Net (loss) gain recognized in OCI (effective portion)	(1,342		)	3,492
Ending unrealized net (loss) gain in AOCI	$	(400	)	$	608

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $1 in each of the fiscal years ended October 1, 2016, October 3, 2015 and September 27, 2014. As of October 1, 2016, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net loss of $416. The maximum remaining maturity of any forward or optional contracts at October 1, 2016 was 0.8 years.

Foreign Currency Balance Sheet Derivatives

We also use foreign currency derivative contracts to maintain the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these derivative contracts are included in other income (expense), net on the Consolidated Statements of Income.

As of October 1, 2016 and October 3, 2015, we had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $13,187 and $66,701, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding at October 1, 2016 and October 3, 2015 was $1,347 and $17,122, respectively. As of October 1, 2016 and October 3, 2015, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of $78 and $286, respectively.

The net (loss) gain recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts for fiscal years 2016, 2015 and 2014 are as follows:

(in thousands)	2016			2015		2014
Net (loss) gain recognized in other income (expense), net	$	(950	)	$	582	$	1,267