Derivative Instruments

12 Months Ended

Oct. 02, 2011

Derivative Instruments [Abstract]

Derivative Instruments

6. 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 converts $100.0 million of our variable rate term loan borrowings to a fixed-rate basis beginning September 2011 through September 2014. Previously, we held two interest rate swaps that effectively converted $200.0 million of our variable rate term loan borrowings to a fixed-rate basis from March 2007 to April 1, 2010. 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 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.

We are also exposed to the impact of utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs through higher prices is limited by the competitive environment in which we operate. Therefore, from time to time, we enter into futures and option contracts to manage these fluctuations. These contracts have not been designated as hedging instruments under the FASB authoritative guidance for derivatives and hedging.

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

	October 2, 2011				October 3, 2010
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps (Note 5)	Accrued liabilities	$	(2,682	)	Accrued liabilities	$	(733	)
Total derivatives		$	(2,682	)		$	(733	)

Financial performance — The following is a summary of the gains or (losses) recognized on our derivative instruments (in thousands):

	Location of Loss in Income	2011			2010			2009
Derivatives designated as hedging instruments:
Interest rate swap loss recognized in OCI (Note 13)	N/A	$	(2,066	)	$	(837	)	$	(6,147	)
Interest rate swap loss reclassified from accumulated OCI into income (Note 13)	Interest expense, net	$	(117	)	$	(4,719	)	$	(6,189	)
Derivatives not designated as hedging instruments:
Natural gas contracts	Occupancy and other	$	-		$	-		$	(544	)

Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparty for the effective portions of the interest rate swaps that were recognized in accumulated other comprehensive income (loss) and reclassified into earnings as an increase to interest expense for the periods presented. During 2011, 2010 and 2009, our interest rate swaps had no hedge ineffectiveness.