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Derivative Instruments And Hedging Activities
 12 Months Ended
Oct. 03, 2014
Derivative Instruments And Hedging Activities [Abstract]  
Derivative Instruments And Hedging Activities

3DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The following disclosures describe the Company’s objectives in using derivative instruments, the business purpose or context for using derivative instruments, and how the Company believes the use of derivative instruments helps achieve the stated objectives.  In addition, the following disclosures describe the effects of the Company’s use of derivative instruments and hedging activities on its financial statements.  See Note 4 of these Notes to Consolidated Financial Statements for disclosures regarding the fair value and effects of changes in the fair value of derivative instruments.

 

Foreign Exchange Risk

The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars, Japanese yen and Canadian dollars. As the values of the currencies of the foreign countries in which the Company has operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, losses, assets and liabilities of the Company’s foreign operations, as reported in the Company’s consolidated financial statements, increase or decrease, accordingly. Approximately 21% of the Company’s revenues for the fiscal year ended October 3, 2014 were denominated in currencies other than the U.S. dollar.  Approximately 9% were denominated in euros and approximately 7% were denominated in Canadian dollars, with the remaining 5% denominated in various other foreign currencies.  Changes in foreign currency exchange rates can cause unexpected financial losses or cash flow needs.

The Company mitigates the impact on its operating results of a portion of the fluctuations in certain foreign currencies through the use of foreign currency forward contracts.  Foreign currency forward contracts enable the Company to lock in the foreign currency exchange rate for a fixed amount of currency to be paid or received on a specified date in the future. The Company uses such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments denominated in foreign currencies. None of the Company’s derivative financial instruments have been designated as hedging instruments. 

As of October 3, 2014 and September 27, 2013, the Company held no foreign currency forward contracts. 

 

Interest Rate Risk

The Company operates in a seasonal business and experiences significant fluctuations in operating cash flow as working capital needs increase in advance of the Company’s primary selling and cash generation season, and decline as accounts receivable are collected and cash is accumulated or debt is repaid.  The Company’s goal in managing its interest rate risk is to maintain a mix of floating rate and fixed rate debt such that permanent non-equity capital needs are largely funded with long term fixed rate debt and seasonal working capital needs are funded with short term floating rate debt.

 

The Company held no interest rate swap contracts in 2014 or 2013.  As of October 3, 2014, the Company was unhedged with respect to interest rate risk on its floating rate debt.

 

The following discloses the location of the Company’s loss reclassified from Accumulated Other Comprehensive Income (“AOCI”) into net income related to previously held derivative instruments during the years ended October 3, 2014,  September 27, 2013, and September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss reclassified from AOCI into:

2014

2013

2012

 

 

 

 

 

 

 

 

 

 

Interest expense

$

 -

$
138 

$
789 

 

 

 

The following discloses the location and amount of income or loss recognized for changes in the fair value of derivative instruments not designated as hedging instruments for the years ended October 3, 2014, September 27, 2013 and September 28, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location of  loss (gain)

 

 

 

 

 

 

 

Derivatives not designated as

recognized in Statement

 

 

 

 

 

hedging instruments

of Operations

 

2014

2013

2012

 

 

 

 

 

 

 

 

 

Foreign exchange forward contract

Other (income) expense, net

 

$

 -

$
13 

$
306