NOTE 6 - DERIVATIVES AND FAIR VALUE MEASUREMENTS

All derivatives are recognized in the accompanying Condensed Consolidated Balance Sheets at their estimated fair value. On the date a derivative contract is entered into, the Company designates the derivative as a hedge of a recognized asset or liability (a "fair value" hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (a "cash flow" hedge), or a hedge of the net investment in a foreign operation. The Company currently has cash flow hedges related to variable rate debt and foreign currency obligations. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of the derivatives that qualify as cash flow hedges are recorded in "Accumulated other comprehensive income" in the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of the cash flows.

The Company's Mexican operations are parties to forward exchange contracts with a total notional value of $1.8 million as of March 31, 2012. These forward contracts will fix the exchange rates on foreign currency cash used to pay a portion of local currency expenses. The total fair value of these forward contracts was a $0.1 million liability as of March 31, 2012 and a $1.0 million liability as of October 1, 2011.

During the second quarter of fiscal 2011, the Company entered into forward exchange contracts to fix the exchange rates on foreign currency cash used to pay for capital expenditures related to the construction of the Company's fourth facility in Malaysia; all contracts were settled as of the end of the first quarter of fiscal 2012. The total fair value of these forward contracts was a $0.1 million liability as of October 1, 2011.

The Company's Malaysian operations have also entered into forward exchange contracts on a rolling basis with a total notional value of $49.5 million as of March 31, 2012. These forward contracts will fix the exchange rates on foreign currency cash used to pay a portion of local currency expenses. The total fair value of these forward contracts was a $0.3 million asset as of March 31, 2012 and a $1.5 million liability as of October 1, 2011.

During the fiscal second quarter of 2011, the Company entered into two separate treasury rate lock hedge contracts to hedge the variability of the fixed interest rate on the then-forecasted issuance of $175 million of fixed rate debt using a treasury lock transaction. The two contracts had a combined notional amount of $150 million and the fixed interest rates for each of these contracts are 2.77% and 2.72%, respectively. On April 4, 2011, the Company entered into a final treasury rate lock hedge transaction for the remaining $25 million of exposure at a rate of 2.88%. On April 8, 2011, when the fixed interest rate for the debt issuance was determined, all three treasury rate lock contracts were settled and the Company received proceeds of $2.3 million, which is being amortized over the seven year term of the related debt.

In June 2008, the Company entered into three interest rate swap contracts related to the $150 million in term loans under the Credit Facility that had an initial total notional value of $150 million and mature on April 4, 2013. These interest rate swap contracts pay the Company variable interest at the three month LIBOR rate, and the Company pays the counterparties a fixed interest rate. The fixed interest rates for each of these contracts are 4.415%, 4.490% and 4.435%, respectively. These interest rate swap contracts were entered into to convert $150 million of the variable rate term loan under the Credit Facility into fixed rate debt. Based on the terms of the interest rate swap contracts and the underlying debt, these interest rate contracts were determined to be effective, and thus qualify as a cash flow hedge. As such, any changes in the fair value of these interest rate swaps are recorded in "Accumulated other comprehensive income" on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. The total fair value of these interest rate swap contracts was a $3.4 million liability as of March 31, 2012 and a $5.2 million liability as of October 1, 2011. As of March 31, 2012, the total remaining combined notional amount of the Company's three interest rate swaps was $90.0 million.

The tables below present information regarding the fair values of derivative instruments (as defined in Note 1 –Basis of Presentation and Accounting Policies) and the effects of derivative instruments on the Company's Condensed Consolidated Financial Statements:


Fair Values of Derivative Instruments

In thousands of dollars
		Asset Derivatives				Liability Derivatives
		March 31,		October 1,			March 31,			October 1,
			2012	2011				2012		2011
						Balance
Derivatives designated	Balance Sheet					Sheet
as hedging instruments	Location	Fair Value		Fair Value		Location	Fair Value			Fair Value
						Current
Interest rate swaps		$	-	$	-	liabilities – Other	$	3,406	$	3,493
Interest rate swaps		$	-	$	-	Other liabilities	$	-	$	1,746
	Prepaid expenses					Current
Forward contracts	and other	$	307	$	-	liabilities – Other	$	136	$	2,544


The Effect of Derivative Instruments on the Condensed Statements of Operations
for the Three Months Ended
In thousands of dollars
													Location of Gain
													or (Loss)
													Recognized in
													Income on
		Amount of Gain or											Derivative		Amount of Gain or
		(Loss) Recognized in				Location of Gain or		Amount of Gain or					(Ineffective		(Loss) Recognized in
Derivatives in		Other Comprehensive				(Loss) Reclassified	(Loss) Reclassified from						Portion and		Income on Derivative
Cash Flow		Income ("OCI") on				from Accumulated	Accumulated OCI into						Amount Excluded		(Ineffective Portion and
Hedging		Derivative (Effective				OCI into Income		Income (Effective					from Effectiveness		Amount Excluded from
Relationships		Portion)				(Effective Portion)		Portion)					Testing)		Effectiveness Testing)
	March 31,				April 2,		March 31,				April 2,				March 31,	April 2,
		2012			2011			2012			2011				2012	2011
Interest rate swaps						Interest income							Other income
	$	(189	)	$	14	(expense)	$	(903	)	$	(1,097	)	(expense)	$	-	$	-
Forward contracts						Selling and							Other income
						administrative							(expense)	$	-	$	-
	$	1,772		$	1,051	expenses	$	63		$	884
Treasury Rate						Interest income							Other income
Locks	$	-		$	1,412	(expense)	$	81		$	-		(expense)	$	-	$	-


The Effect of Derivative Instruments on the Condensed Statements of Operations
for the Six Months Ended
In thousands of dollars
												Location of Gain
												or (Loss)
												Recognized in
												Income on
		Amount of Gain or										Derivative		Amount of Gain or
		(Loss) Recognized in			Location of Gain or							(Ineffective		(Loss) Recognized in
Derivatives in		Other Comprehensive			(Loss) Reclassified		Amount of Gain or (Loss)					Portion and		Income on Derivative
Cash Flow		Income ("OCI") on			from Accumulated		Reclassified from					Amount Excluded		(Ineffective Portion and
Hedging		Derivative (Effective			OCI into Income		Accumulated OCI into					from Effectiveness		Amount Excluded from
Relationships		Portion)			(Effective Portion)		Income (Effective Portion)					Testing)		Effectiveness Testing)
	March 31,			April 2,			March 31,			April 2,				March 31,	April 2,
		2012		2011			2012			2011				2012	2011
Interest rate swaps					Interest income							Other income
	$	15	$	256	(expense)	$	(1,818	)	$	(2,221	)	(expense)	$	-	$	-
Forward contracts					Selling and							Other income
					administrative							(expense)
	$	2,392	$	1,413	expenses	$	(304	)	$	1,895			$	-	$	-
Treasury Rate					Interest income							Other income
Locks	$	-	$	1,412	(expense)	$	160		$	-		(expense)	$	-	$	-

The following table lists the fair values of assets/(liabilities) of the Company's derivatives as of March 31, 2012, by input level as defined above (in thousands):


Derivatives		Level 1		Level 2			Level 3		Total

Interest rate swaps	$	-	$	(3,406	)			$	(3,406	)
						$	-

Foreign currency forward contracts	$	-	$	171				$	171
						$	-

The fair value of interest rate swaps and foreign currency forward contracts is determined using a market approach which includes obtaining directly or indirectly observable values from third parties active in the relevant markets. The primary input in the fair value of the interest rate swaps is the relevant LIBOR forward curve. Inputs in the fair value of the foreign currency forward contracts include prevailing forward and spot prices for currency and interest rate forward curves.