DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Apr. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

Derivative Financial Instruments

As of April 2, 2016, the Company had outstanding foreign currency forward contracts with a total notional amount of $67.8 million. The maturity dates for these contracts extend through March 2019. For the three months ended April 2, 2016, the Company entered into $7.0 million of foreign currency forward contracts and settled $5.7 million of such contracts. During the same period of the previous year, the Company entered into $5.8 million of foreign currency forward contracts and settled $5.0 million of such contracts.

For the nine months ended April 2, 2016, the Company entered into foreign currency forward contracts of $19.0 million and settled $16.3 million of such contracts. During the same period of the previous year, the Company entered into foreign currency forward contracts of $23.1 million and settled $15.3 million of such contracts.

On October 1, 2014, the Company entered into an interest rate swap contract with an effective date of September 1, 2015 and a termination date of September 3, 2019, with a notional amount of $25.0 million related to the borrowings outstanding under the term loan and line of credit. This interest rate swap pays the Company variable interest at the one month LIBOR rate, and the Company pays the counter party a fixed interest rate. The fixed interest rate for the contract is 1.97% that replaces the one month LIBOR rate component of our contractual interest to be paid to WFB as part of our debt facilities. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the term loan, the interest rate contract was determined to be effective, and thus qualifies as a cash flow hedge.

The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of April 2, 2016 and June 27, 2015 (in thousands):

		April 2, 2016			June 27, 2015
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value			Fair Value
Foreign currency forward contracts	Other long-term assets	$	263		$	—
Foreign currency forward contracts	Other current liabilities	$	(3,968	)	$	(2,517	)
Foreign currency forward contracts	Other long-term liabilities	$	(5,454	)	$	(4,282	)
Interest rate swap	Other long-term assets	$	—		$	25
Interest rate swap	Other current liabilities	$	(273	)	$	(271	)
Interest rate swap	Other long-term liabilities	$	(233	)	$	(172	)

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended April 2, 2016 and March 28, 2015, respectively (in thousands):

Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of December 26, 2015			Effective Portion Recorded In AOCI			Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of April 2, 2016
Forward contracts	Cost of sales	$	(6,769	)	$	(589	)	$	1,313	$	(6,045	)
Interest rate swap	Interest expense	(287		)	(142		)	95		(334		)
Total		$	(7,056	)	$	(731	)	$	1,408	$	(6,379	)
Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of December 27, 2014			Effective Portion Recorded In AOCI			Effective Portion Reclassified From AOCI Into Income		AOCI Balance as of March 28, 2015
Forward contracts	Cost of sales	$	(2,806	)	$	(1,320	)	$	25	$	(4,101	)
Interest rate swap	Interest expense	(141		)	(143		)	—		(284		)
Total		$	(2,947	)	$	(1,463	)	$	25	$	(4,385	)

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the nine months ended April 2, 2016 and March 28, 2015, respectively (in thousands):

Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of June 27, 2015			Effective Portion Recorded In AOCI			Effective Portion Reclassified From AOCI Into Income			AOCI Balance as of April 2, 2016
Forward contracts	Cost of sales	$	(4,487	)	$	(4,479	)	$	2,921		$	(6,045	)
Interest rate swap	Interest expense	(276		)	(268		)	210			(334		)
Total		$	(4,763	)	$	(4,747	)	$	3,131		$	(6,379	)
Derivatives Designated as Hedging Instruments	Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	AOCI Balance as of June 28, 2014			Effective Portion Recorded In AOCI			Effective Portion Reclassified From AOCI Into Income			AOCI Balance as of March 28, 2015
Forward contracts	Cost of sales	$	2,403		$	(5,739	)	$	(765	)	$	(4,101	)
Interest rate swap	Interest expense	—			(284		)	—			(284		)
Total		$	2,403		$	(6,023	)	$	(765	)	$	(4,385	)

The Company does not enter into derivative instruments for trading or speculative purposes. The Company’s counterparties to the foreign currency forward contracts and interest rate swaps are major financial institutions. These institutions do not require collateral for the contracts and the Company believes that the risk of the counterparties failing to meet their contractual obligations is remote. As of April 2, 2016, the net amount of unrealized loss expected to be reclassified into earnings within the next 12 months is approximately $2.8 million. As of April 2, 2016, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.