Derivative Instruments and Hedging Activities

12 Months Ended

Sep. 27, 2014

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

5. Derivative Instruments and Hedging Activities

The Company’s currency exchange and interest rate swaps are designated as cash flow hedges and qualify as hedging instruments pursuant to ASC 815. The Company also has derivatives which are not designated as cash flow hedges and, therefore, are accounted for and reported under the guidance of ASC 830. Regardless of designation for accounting purposes, the Company believes that all of its derivative instruments are hedges of transactional risk exposures. The fair value of the Company’s outstanding designated and undesignated derivative assets and liabilities are reported in the September 27, 2014 and September 28, 2013 Consolidated Balance Sheet as follows:

		September 27, 2014
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	1,750	$	178
Total designated hedge derivatives		1,750		178
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		641		-
Total hedge and other derivatives	$	2,391	$	178

		September 28, 2013
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	1,091	$	1,307
Total designated hedge derivatives		1,091		1,307
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		167
Total hedge and other derivatives	$	1,091	$	1,474

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 (“AOCI”) within Shareholders’ Investment 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. The Company periodically assesses whether its currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, the Company discontinues 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 Statement of Income, because that is the same line item in which the underlying hedged transaction is reported.

At September 27, 2014 and September 28,  2013, the Company had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $46.8 million and $65.7 million, 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 were $39.6 million and $48.0 million at September 27, 2014 and September 28, 2013, respectively. At September 27, 2014, the net market value of the foreign currency exchange contracts was a net asset of $1.6 million, consisting of $1.8 million in asset and $0.2 million in liabilities. At September 28, 2013, the net market value of the foreign currency exchange contracts was a net liability of $0.2 million, consisting of $1.3 million in liabilities and $1.1 million in assets.

The pretax amounts recognized in AOCI on currency exchange contracts for the fiscal years ended September 27, 2014 and September 28, 2013, including gains (losses) reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (“OCI”), are as follows:

		2014		2013
		(expressed in thousands)
Beginning unrealized net loss in AOCI	$	754	$	(648)
Net gain reclassified into Revenue (effective portion)		(1,089)		(733)
Net gain recognized in OCI (effective portion)		1,749		2,135
Ending unrealized net gain (loss) in AOCI	$	1,414	$	754

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $0.1 million in each of the fiscal years ended September 27, 2014, September 28, 2013 and September 29, 2012. At September 27, 2014, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $1.4 million. The maximum remaining maturity of any forward or optional contract at September 27, 2014 was 2.7 years.

Foreign Currency Balance Sheet Derivatives

The Company also uses 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 (Expense) Income, net on the Consolidated Statements of Income.

At September 27, 2014 and September 28, 2013, the Company had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $58.3 million and $26.7 million, 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 September 27, 2014 and September 28, 2013 was $12.2 and $8.6 million, respectively. At September 27, 2014 and September 28, 2013, the net market value of the foreign exchange balance sheet derivative contracts was a net asset of $0.6 million and a net liability of $0.2 million, respectively.

The net losses recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts for the fiscal years ended September 27, 2014, September 28, 2013 and September 29, 2012 are as follows:

		2014		2013		2012
		(expressed in thousands)
Net gain (loss) recognized in Other (expense) income, net	$	1,267	$	(258)	$	(294)