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Derivative Financial Instruments
 9 Months Ended
Jul. 04, 2015
Derivative Instruments and Hedges, Assets [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
We principally use derivative financial instruments to manage interest rate risk associated with long-term debt and foreign exchange risk related to foreign operations and foreign currency transactions. 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 July 4, 2015, we had interest rate swaps with notional amounts totaling $245,000. The interest rate swaps effectively convert this amount of variable-rate debt to fixed-rate debt at 2.3%, including the applicable margin of 163 basis points as of July 4, 2015. The interest will revert back to variable rates based on LIBOR plus the applicable margin upon the maturity of the interest rate swaps. These interest rate swaps mature at various times between January 15, 2016 and June 5, 2017.
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 $55,627 at July 4, 2015. These contracts mature at various times through June 2, 2017.
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 2015 or 2014.
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 $121,301 at July 4, 2015. 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
 
 
 
July 4,
2015
 
June 28,
2014
 
July 4,
2015
 
June 28,
2014
Net gain (loss)
 
 
$
(1,246
)
 
$
3,416

 
$
(2,661
)
 
$
5,941


Summary of derivatives
The fair value and classification of derivatives is summarized as follows:
 
 
 
July 4,
2015
 
September 27,
2014
Derivatives designated as hedging instruments:
 
 
 
 
   Foreign currency forwards
Other current assets
 
$
294

 
$
—

   Foreign currency forwards
Other assets
 
43

 
—

   Interest rate swaps
Other current assets
 
—

 
70

   Interest rate swaps
Other assets
 
—

 
107

 
Total asset derivatives
 
$
337

 
$
177

   Foreign currency forwards
Other accrued liabilities
 
$
867

 
$
1,521

   Foreign currency forwards
Other long-term liabilities
 
223

 
494

   Interest rate swaps
Other accrued liabilities
 
522

 
110

   Interest rate swaps
Other long-term liabilities
 
215

 
28

 
Total liability derivatives
 
$
1,827

 
$
2,153

Derivatives not designated as hedging instruments:
 
 
 
 
   Foreign currency forwards
Other current assets
 
$
451

 
$
821

   Foreign currency forwards
Other accrued liabilities
 
$
898

 
$
2,991