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Derivative Instruments And Hedging Activities
 9 Months Ended
Jun. 27, 2014
Derivative Instruments And Hedging Activities [Abstract]  
Derivative Instruments And Hedging Activities

14Derivative 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.

Foreign Exchange Risk

The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Japanese yen, Hong Kong dollars 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 18% of the Company’s revenues for the nine month period ended June 27, 2014 were denominated in currencies other than the U.S. dollar. Approximately 8% were denominated in euros, with the remaining revenues denominated in various other foreign currencies. Changes in foreign currency exchange rates can cause unexpected financial losses or cash flow needs.

The Company may mitigate 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 to be paid or received for a fixed amount of currency at a specified date in the future. The Company may use such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments, including commitments for inventory purchases, denominated in foreign currencies. As of June 27, 2014, 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 or cash and cash equivalents on hand.

When the appropriate mix of fixed rate or floating rate debt cannot be directly obtained in a cost effective manner, the Company may enter into interest rate swap contracts in order to change floating rate interest into fixed rate interest or vice versa for a specific amount of debt in order to achieve the desired proportions of floating rate and fixed rate debt.  

The Company held no interest rate swap contracts during the nine month periods ended June 27, 2014 and June 28, 2013 and as of June 27, 2014, the Company was unhedged with respect to interest rate risk on its floating rate debt.  The Company has fully amortized the unrealized loss related to the formerly effective interest rate swap that had subsequently become ineffective on January 2, 2009.

The following table discloses the location of loss reclassified from accumulated other comprehensive income (“AOCI”) into net income related to derivative instruments during the three and nine month periods ended June 27, 2014 and June 28, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

June 27

June 28

June 27

June 28

Loss reclassified from AOCI into:

2014

2013

2014

2013

Interest expense

$

 -

$

 -

$

 -

$
138 

 

The effect of derivative instruments on the accompanying Condensed Consolidated Statements of Operations for the three months ended June 27, 2014 and June 28, 2013 was:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location of  loss (gain)

 

Three Months Ended

Derivatives not designated as

recognized in statement

 

June 27

June 28

hedging instruments

of operations

 

2014

2013

Foreign exchange forward contracts

Other expense (income), net

 

$

 -

$
(10)

 

 

 

 

 

 

 

The effect of derivative instruments on the Condensed Consolidated Statements of Operations for the nine months

ended June 27, 2014 and June 28, 2013 was:

 

 

 

 

 

 

 

 

Location of  loss (gain)

 

Nine Months Ended

Derivatives not designated as

recognized in statement

 

June 27

June 28

hedging instruments

of operations

 

2014

2013

Foreign exchange forward contracts

Other expense (income), net

 

$

 -

$
59