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Note 16 - Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

3 Months Ended

Sep. 29, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

16. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Financial Instruments

The Company uses derivative financial instruments such as foreign currency forward contracts or interest rate swaps to reduce its ongoing business exposures to fluctuations in foreign currency exchange rates or interest rates. The Company does not enter into derivative contracts for speculative purposes.

Foreign currency forward contracts

The Company enters into foreign currency forward contracts as economic hedges for exposures related to certain sales, inventory purchases and equipment purchases which are denominated in currencies that are not its functional currency. As of September 29, 2013, the latest maturity date for all outstanding foreign currency forward contracts is during November 2013. These items are not designated as hedges by the Company and are marked to market each period and offset by the foreign exchange (gains) losses included in Other operating expense, net resulting from the underlying exposures of the foreign currency denominated assets and liabilities.

Interest rate swap

On May 18, 2012, the Company entered into a five year, $50,000 interest rate swap with Wells Fargo to provide a hedge against the variability of cash flows related to additional LIBOR-based variable rate borrowings under the Company’s ABL Revolver and ABL Term Loan. It increased to $85,000 in May 2013 and will decrease $5,000 per quarter beginning with the current quarter until the balance again reaches $50,000 in February 2015, where it will remain through the life of the instrument. This interest rate swap allows the Company to fix LIBOR at 1.06% and terminates on May 24, 2017.

On November 26, 2012, the Company de-designated this interest rate swap as a cash flow hedge. For the quarterly period ended September 29, 2013, the Company reclassified pre-tax unrealized losses of $155 from Accumulated other comprehensive income to Interest expense; the Company expects to reclassify additional losses of $502 during the next twelve months.

The Company’s financial assets and liabilities accounted for at fair value on a recurring basis and the level within the fair value hierarchy used to measure these items are as follows:

As of September 29, 2013

Notional

Amount

USD

Equivalent

Balance Sheet Location

Fair Value

Level 2

Foreign currency contracts

MXN

4,000

$

306

Other current assets

$

3

Interest rate swap

USD

$

80,000

$

80,000

Other long-term liabilities

$

(464

)

As of June 30, 2013

Notional

Amount

USD

Equivalent

Balance Sheet Location

Fair Value

Level 2

Foreign currency contracts

MXN

3,800

$

295

Other current assets

$

3

Interest rate swap

USD

$

85,000

$

85,000

Other long-term liabilities

$

(324

)

(MXN represents the Mexican Peso)

Estimates of the fair value of the Company’s foreign currency forward contracts and interest rate swaps are obtained from month-end market quotes for contracts with similar terms.

The effect of marked to market hedging derivative instruments was as follows:

				For the Three Months Ended
Derivatives not designated as hedges		Classification		September 29, 2013				September 23, 2012
Foreign exchange contracts – MXN/USD		Other operating expense, net		$	(6	)		$	36
Interest rate swap		Interest expense			140				—
Total (gain) loss recognized in income				$	134			$	36

By entering into derivative instrument contracts, the Company exposes itself to counterparty credit risk. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting the amount of exposure to any single counterparty and regularly monitoring its market position with each counterparty. The Company’s derivative instruments do not contain any credit risk related contingent features.

Since its most recent debt refinancing and modification, the Company believes that there have been no significant changes to its credit risk profile or the interest rates available to the Company for debt issuances with similar terms and average maturities and the Company estimates that the fair values of these long-term debt obligations approximate their carrying amounts. Other financial instruments include cash and cash equivalents, receivables, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair value because of their short-term nature.

Non-Financial Assets and Liabilities

The Company did not have any non-financial assets or liabilities that were required to be measured at fair value on a recurring basis.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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