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Derivative Financial Instruments
 9 Months Ended
Jun. 29, 2013
Derivative Instruments and Hedges, Assets [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments

We principally use derivative financial instruments to manage foreign exchange risk related to foreign operations and foreign currency transactions and interest rate risk associated with long-term debt. We enter into derivative financial instruments with a number of major financial institutions to minimize counterparty credit risk.
Derivatives designated as hedging instruments

Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. The interest rate swaps are designated as hedges of the amount of future cash flows related to interest payments on variable-rate debt that, in combination with the interest payments on the debt, convert a portion of the variable-rate debt to fixed-rate debt. At June 29, 2013, we had interest rate swaps with notional amounts totaling $120,000. The interest rate swaps effectively convert this amount of variable-rate debt to fixed-rate debt at 1.8%, including the applicable margin of 138 basis points as of June 29, 2013. The interest will revert back to variable rates based on LIBOR plus the applicable margin upon the maturity of the interest rate swaps on January 15, 2015 and January 15, 2016.

We use foreign currency forward contracts as cash flow hedges to effectively fix the exchange rates on future payments and revenue. To mitigate exposure in movements between various currencies, primarily the Philippine peso, we had outstanding foreign currency forwards with notional amounts of $49,433 at June 29, 2013. These contracts mature at various times through the third quarter of 2015.

These interest rate swaps and foreign currency forwards are recorded in the consolidated condensed balance sheets at fair value and the related gains or losses are deferred in shareholders’ equity as a component of Accumulated Other Comprehensive Income (Loss) (AOCI). These deferred gains and losses are reclassified into expense during the periods in which the related payments or receipts affect earnings. However, to the extent the interest rate swaps and foreign currency forwards are not perfectly effective in offsetting the change in the value of the payments and revenue being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was not material in the first nine months of 2013 or 2012.

Activity in AOCI related to these derivatives is summarized below:
 
 
Three Months Ended
 
Nine Months Ended
 
 
June 29, 2013
 
June 30, 2012
 
June 29, 2013
 
June 30, 2012
Balance at beginning of period
 
$
72

 
$
(78
)
 
$
220

 
$
(165
)
Net deferral in AOCI of derivatives:
 
 
 
 
 
 
 
 
Net increase (decrease) in fair value of derivatives
 
(1,863
)
 
372

 
(1,696
)
 
568

Tax effect
 
722

 
(173
)
 
652

 
(245
)
 
 
(1,141
)
 
199

 
(1,044
)
 
323

Net reclassification from AOCI into earnings:
 
 
 
 
 
 
 
 
Reclassification from AOCI into earnings
 
(42
)
 
6

 
(462
)
 
(67
)
Tax effect
 
16

 
3

 
191

 
39

 
 
(26
)
 
9

 
(271
)
 
(28
)
Balance at end of period
 
$
(1,095
)
 
$
130

 
$
(1,095
)
 
$
130



Activity and classification of derivatives are as follows:
 
 
 
Net deferral in AOCI of derivatives - effective portion
 
 
 
Three Months Ended
 
Nine Months Ended
 
Statement of earnings classification
 
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Interest rate swaps
Interest expense
 
$
156

 
$
—

 
$
(47
)
 
$
—

Foreign currency forwards
Cost of sales
 
(2,019
)
 
372

 
(1,649
)
 
568

Net gain (loss)

 
$
(1,863
)
 
$
372

 
$
(1,696
)
 
$
568

 
 
 
Net reclassification from AOCI into earnings - effective portion
 
 
 
Three Months Ended
 
Nine Months Ended
 
Statement of earnings classification
 
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Interest rate swaps
Interest expense
 
$
(61
)
 
$
—

 
$
(104
)
 
$
(67
)
Foreign currency forwards
Cost of sales
 
103

 
(6
)
 
566

 
134

Net gain (loss)

 
$
42

 
$
(6
)
 
$
462

 
$
67



Derivatives not designated as hedging instruments
We also have foreign currency exposure on balances, primarily intercompany, that are denominated in foreign currencies and are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in the consolidated condensed statements of earnings. To minimize foreign currency exposure, we had foreign currency forwards with notional amounts of $231,197 at June 29, 2013. The foreign currency forwards are recorded in the consolidated condensed balance sheets at fair value and resulting gains or losses are recorded in the consolidated condensed statements of earnings. We recorded the following gains or losses on foreign currency forwards which are included in other income or expense and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other income or expense:
 
 
Three Months Ended
 
Nine Months Ended
 
 
June 29,
2013
 
June 30,
2012
 
June 29,
2013
 
June 30,
2012
Net gain (loss)
 
$
(2,835
)
 
$
(812
)
 
$
3,066

 
$
(1,383
)


Summary of derivatives

The fair value and classification of derivatives is summarized as follows:
 
 
 
June 29,
2013
 
September 29,
2012
Derivatives designated as hedging instruments:
 
 
 
 
   Foreign currency forwards
Other current assets
 
$
90

 
$
467

   Foreign currency forwards
Other assets
 
50

 
32

   Interest rate swaps
Other current assets
 
33

 
—

   Interest rate swaps
Other assets
 
48

 
—

 
Total assets
 
$
221

 
$
499

   Foreign currency forwards
Other accrued liabilities
 
$
1,130

 
$
41

   Foreign currency forwards
Other long-term liabilities
 
858

 
40

   Interest rate swaps
Other accrued liabilities
 
21

 
—

   Interest rate swaps
Other long-term liabilities
 
12

 
—

 
Total liabilities
 
$
2,021

 
$
81

Derivatives not designated as hedging instruments:
 
 
 
 
   Foreign currency forwards
Other current assets
 
$
2,026

 
$
1,456

 
Total assets
 
$
2,026

 
$
1,456

   Foreign currency forwards
Other accrued liabilities
 
$
1,552

 
$
2,549

 
Total liabilities
 
$
1,552

 
$
2,549