Derivative Instruments

9 Months Ended

Jul. 05, 2015

Derivative Instruments and Hedges, Assets [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

Objectives and strategies — We are exposed to interest rate volatility with regard to our variable rate debt. To reduce our exposure to rising interest rates, in August 2010, we entered into two interest rate swap agreements that effectively converted $100.0 million of our variable rate term loan borrowings to a fixed-rate basis from September 2011 through September 2014. In April 2014, we entered into nine forward-starting interest rate swap agreements that effectively convert $300.0 million of our variable rate borrowings to a fixed rate basis from October 2014 through October 2018. In June 2015, we entered into 11 forward-starting interest rate swap agreements that effectively convert an additional $200.0 million of our variable rate borrowings to a fixed rate from October 2015 through October 2018, and $500.0 million from October 2018 through October 2022. These agreements have been designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. To the extent that they are effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings, but are included in other comprehensive income (“OCI”). These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on our term debt.

Financial position — The following derivative instruments were outstanding as of the end of each period (in thousands):

	July 5, 2015				September 28, 2014
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps (Note 5)	Accrued liabilities	$	(2,341	)	Accrued liabilities	$	(1,789	)
Interest rate swaps (Note 5)	Other long-term liabilities	$	(9,591	)	Other long-term liabilities	$	—
Total derivatives		$	(11,932	)		$	(1,789	)

Financial performance — The following is a summary of the OCI activity related to our interest rate swap derivative instruments (in thousands):

	Location of Loss in Income	Quarter						Year-to-date
		July 5, 2015			July 6, 2014			July 5, 2015			July 6, 2014
Gain (loss) recognized in OCI	N/A	$	(5,027	)	$	(14	)	$	(11,699	)	$	(99	)
Loss reclassified from accumulated OCI into net earnings	Interest expense,  net	$	461		$	324		$	1,556		$	1,072

Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparties for the effective portions of the interest rate swaps. During the periods presented, our interest rate swaps had no hedge ineffectiveness.