All derivatives are recognized in the accompanying Condensed Consolidated Balance Sheets at their estimated fair value. The Company uses derivatives to manage the variability of foreign currency obligations and interest rates. The Company has cash flow hedges related to variable rate debt and forecasted foreign currency obligations, in addition to fair value hedges to manage foreign currency exposures associated with certain foreign currency denominated assets and liabilities. 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. Changes in the fair value of the derivatives related to recognized foreign currency denominated assets and liabilities are recorded in "Other income (expense)" in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company enters into forward currency exchange contracts on a rolling basis. The Company had cash flow hedges outstanding with a notional value of $60.0 million as of January 3, 2015 and a notional value of $64.6 million as of September 27, 2014. These forward currency contracts fix the exchange rates for the settlement of future foreign currency obligations that have yet to be realized. The total fair value of the cash flow hedges was a $3.6 million liability as of January 3, 2015 and a $0.8 million asset as of September 27, 2014.

The Company had additional forward currency exchange contracts outstanding with a notional value of $5.4 million as of January 3, 2015 and a notional value of $37.9 million as of September 27, 2014. The Company has not designated these derivative instruments as hedging instruments. The net settlement amount (fair value) related to these contracts is recorded on the Condensed Consolidated Balance Sheets as either a current or long-term asset or liability, depending on the term, and as an element of other income (expense). The total fair value of these derivatives was a $0.2 million asset as of January 3, 2015 and a $1.5 million asset as of September 27, 2014.

On June 4, 2013, the Company entered into an interest rate swap contract to replace the three interest rate swap contracts that matured on April 4, 2013, as described below. This interest rate swap contract is related to $75.0 million of borrowings outstanding under its Credit Facility. This interest rate swap pays the Company variable interest at the one month LIBOR rate, and the Company pays the counterparty a fixed interest rate. The fixed interest rate for the contract is 0.875%. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the Credit Facility, the interest rate contract was determined to be effective, and thus qualifies as a cash flow hedge. As such, any changes in the fair value of the interest rate swap 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 the interest rate swap contract was less than a $0.1 million asset as of January 3, 2015 and a $0.2 million asset as of September 27, 2014. The notional amount of the Company’s interest rate swap was $75.0 million as of both January 3, 2015 and September 27, 2014.

The tables below present information regarding the fair values of derivative instruments (as defined in Note 1, "Basis of Presentation and Significant 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
		January 3, 2015		September 27, 2014			January 3, 2015		September 27, 2014
Derivatives designated as hedging instruments	Balance Sheet Classification	Fair Value		Fair Value		Balance Sheet Classification	Fair Value		Fair Value
Interest rate swaps	Prepaid expenses and other	$	10	$	182	Current liabilities – other	$	—	$	—
Forward contracts	Prepaid expenses and other	$	—	$	812	Current liabilities – other	$	3,570	$	—

Fair Values of Derivative Instruments

In thousands of dollars

Asset Derivatives

Liability Derivatives

January 3, 2015

September 27, 2014

January 3, 2015

September 27, 2014

Derivatives not designated as hedging instruments

Balance Sheet

Classification

Fair Value

Balance Sheet

Classification

Fair Value

Forward contracts

Prepaid expenses and other

158

1,512

Current

liabilities – other

—



The Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Income
for the Three Months Ended
In thousands of dollars
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative (Effective Portion)						Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)					Classification of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	January 3, 2015			December 28, 2013				January 3, 2015		December 28, 2013				January 3, 2015		December 28, 2013
Interest rate swaps	$	(36	)	$	(31	)	Interest expense	$	137	$	(132	)	Other income (expense)	$	—	$	—
Forward contracts	$	(4,256	)	$	(743	)	Selling and administrative expenses	$	125	$	(250	)	Other income (expense)	$	—	$	—
Treasury rate locks	$	—		$	—		Interest income	$	86	$	79		Other income (expense)	$	—	$	—
Income tax (benefit) expense	$	—		$	—		Income tax (benefit) expense	$	4	$	52		Income tax (benefit) expense	$	—	$	—

The following table lists the fair values of assets (liabilities) of the Company’s derivatives as of January 3, 2015 and September 27, 2014, by input level as defined in Note 1 (in thousands):



	Level 1		Level 2			Level 3		Total
January 3, 2015
Interest rate swaps	$	—	$	10		$	—	$	10
Foreign currency forward contracts	$	—	$	(3,412	)	$	—	$	(3,412	)
September 27, 2014
Interest rate swaps	$	—	$	182		$	—	$	182
Foreign currency forward contracts	$	—	$	2,324		$	—	$	2,324

The fair value of interest rate swaps and foreign currency forward contracts is determined using a market approach that 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.