XML 58 R16.htm IDEA: XBRL DOCUMENT
v3.20.1

Derivatives | 6 Months Ended
--- | ---
Mar. 28, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Interest Rate Cap - Cash Flow Hedge The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposure to some of its interest rate risk through the use of interest rate caps, which are derivative financial instruments. The Company does not use derivatives for speculative purposes. For a derivative that is designated as a cash flow hedge, changes in the fair value of the derivative are recognized in accumulated other comprehensive income ("AOCI") to the extent the derivative is effective at offsetting the changes in the cash flows being hedged until the hedged item affects earnings. To the extent there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately recognized in earnings in other income (expense), net in the Consolidated Statements of Operations. During fiscal 2018, the Company entered into separate interest rate cap agreements with multiple counter-parties to help mitigate the interest rate volatility associated with the variable interest rate on amounts borrowed under the term loan feature of its credit facilities (see Note 7). Interest rate cap agreements provide the right to receive cash if the reference interest rate rises above a contractual rate. The aggregate premium paid for these interest rate cap agreements was $3.7 million, which was the initial fair value of the instruments recorded in the Company's financial statements. During fiscal 2019, the Company entered into additional separate interest rate cap agreements with multiple counter-parties to extend the expiration date of its hedges by an additional year. The aggregate premium paid for these interest cap agreements was $1.5 million, which was the initial fair value of the instruments recorded in the Company’s financial statements. The critical terms of the interest rate caps were designed to mirror the terms of the Company’s LIBOR-based borrowings under its Credit Agreement, that has been amended multiple times, and therefore are highly effective at offsetting the cash flows being hedged. The Company designated these derivatives as cash flow hedges of the variability of the LIBOR-based interest payments on $1.0 billion of principal, which ended on December 27, 2019 for the contracts entered into in fiscal 2018, and which will end on December 23, 2020 for the interest rate cap agreements entered into in fiscal 2019. As of March 28, 2020, all changes in the fair value of the interest rate caps were recorded in the Consolidated Statements of Comprehensive Income (Loss). During the three and six months ended March 28, 2020 and March 30, 2019, the Company reclassified $0.4 million and $1.7 million, respectively and $0.5 million and $1.2 million, respectively from AOCI to the Consolidated Statements of Operations related to the interest rate cap agreements. The Company expects to similarly reclassify a loss of approximately $1.1 million from AOCI to the Consolidated Statements of Operations in the next nine months. The aggregate fair value of these interest rate caps was $0.0 million and $0.1 million at March 28, 2020 and September 28, 2019, respectively, and is included in prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet. Refer to Note 4 “Fair Value Measurements” above for related fair value disclosures. Interest Rate Swap - Cash Flow Hedge In fiscal 2019, in order to hedge a portion of its variable rate debt beyond the contracted period under interest cap agreements, the Company entered into an interest rate swap contract with an effective date of December 23, 2020 and a termination date of December 17, 2023. The notional amount of this swap is $1.0 billion. The interest rate swap effectively fixes the LIBOR component of the variable interest rate on $1.0 billion of the notional amount under the 2018 Credit Agreement at 1.23%. The critical terms of the interest rate swap are designed to mirror the terms of the Company’s LIBOR-based borrowings under its credit agreement and therefore are highly effective at offsetting the cash flows being hedged. The Company designated this derivative as a cash flow hedge of the variability of the LIBOR-based interest payments on $1.0 billion of principal. Therefore, changes in the fair value of the swap are recorded in AOCI. The fair value of this derivative was in a liability position of $22.9 million as of March 28, 2020. Forward Foreign Currency Contracts and Foreign Currency Option Contracts The Company enters into forward foreign currency exchange contracts and foreign currency option contracts to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company's operations that are denominated in currencies other than the U.S. dollar, primarily the Euro, the UK Pound, the Australian dollar, the Canadian dollar, the Chinese Yuan and the Japanese Yen. These foreign currency exchange contracts are entered into to support transactions made in the ordinary course of business and are not speculative in nature. The contracts are generally for periods of one year or less. The Company did not elect hedge accounting for these forward foreign currency contracts and foreign currency option contracts; however, the Company may seek to apply hedge accounting in future scenarios. The change in the fair value of these contracts is recognized directly in earnings as a component of other income (expense), net. During the three and six months ended March 28, 2020, for the forward foreign currency exchange contracts the Company recorded net realized gains of $0.1 million in both periods from settling forward foreign currency exchange contracts and net unrealized gains of $2.6 million and $1.1 million, respectively, on the mark-to-market for its outstanding forward foreign currency contracts. During the three and six months ended March 30, 2019, the Company recorded net realized gains of $1.8 million and $3.5 million, respectively, from settling forward foreign currency contracts and net unrealized loss of $1.4 million and net realized gain of $2.0 million, respectively, on the mark-to-market for its outstanding forward foreign currency contracts. During the three and six months ended March 28, 2020, for the foreign currency option contracts the Company recorded net unrealized gains of $1.1 million and net unrealized losses of $0.4 million, respectively, on outstanding option contracts. During the three and six months ended March 28, 2020, for the foreign currency option contracts, the Company recorded net realized losses of $0.5 million and $0.7 million, respectively, on outstanding option contracts. As of March 28, 2020, the Company had outstanding forward foreign currency contracts that were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar of forecasted transactions denominated in the Australian dollar, Canadian Dollar, Chinese Yuan and Japanese Yen with an aggregate notional amount of $51.0 million. As of March 28, 2020, the Company had outstanding foreign currency option contracts that were not designated for hedge accounting and are used to hedge fluctuations in the U.S. dollar of forecasted transactions denominated in the Euro and UK Pound with a notional amount of $80.6 million. Financial Instrument Presentation The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the balance sheet as of March 28, 2020:
| Balance Sheet Location |  | March 28, 2020 |  | September 28, 2019
Assets: |  |  |  |  |
Derivative instruments designated as a cash flow hedge: |  |  |  |  |
Interest rate cap agreements | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 0.1 |
Interest rate swap contract | Other assets |  | — |  |  | 4.7 |
|  |  | $ | — |  |  | $ | 4.8 |
Derivatives not designated as hedging instruments: |  |  |  |  |
Forward foreign currency contracts | Prepaid expenses and other current assets |  | $ | 1.9 |  |  | $ | 0.9 |
Foreign currency option contracts | Prepaid expenses and other current assets |  | 0.9 |  |  | 2.0 |
|  |  | $ | 2.8 |  |  | $ | 2.9 |
Liabilities: |  |  |  |  |
Derivative instruments designated as a cash flow hedge: |  |  |  |  |
Interest rate swap contract | Accrued expenses |  | $ | 2.4 |  |  | $ | — |
Interest rate swap contract | Other long-term liabilities |  | 20.5 |  |  | — |
Total |  |  | $ | 22.9 |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |
Forward foreign currency contracts | Accrued expenses |  | $ | — |  |  | $ | 0.1 |
The following table presents the unrealized gain (loss) recognized in AOCI related to the interest rate caps and interest rate swap for the following reporting periods:
| Three Months Ended |  | Six Months Ended
| March 28, 2020 |  | March 30, 2019 |  | March 28, 2020 |  | March 30, 2019
Amount of loss recognized in other comprehensive income, net of taxes: |  |  |  |  |  |  |
Interest rate swap | $ | (25.2 | ) |  | $ | — |  |  | $ | (20.8 | ) |  | $ | — |
Interest rate cap agreements | (0.1 | ) |  | (1.5 | ) |  | (0.4 | ) |  | (5.4 | )
Total | $ | (25.3 | ) |  | $ | (1.5 | ) |  | $ | (21.2 | ) |  | $ | (5.4 | )
The following table presents the adjustment to fair value (realized and unrealized) recorded within the Consolidated Statements of Income for derivative instruments for which the Company did not elect hedge accounting:
Derivatives not classified as hedging instruments | Amount of (Loss) Gain Recognized in Income
| Three Months Ended March 28, 2020 |  | Three Months Ended March 30, 2019 |  | Six Months Ended March 28, 2020 |  | Six Months Ended March 30, 2019
Forward foreign currency contracts | $ | 2.7 |  |  | $ | 0.4 |  |  | $ | 1.3 |  |  | $ | 5.5 |
Foreign currency option contracts | 0.6 |  |  | — |  |  | (1.1 | ) |  | — |
Total | $ | 3.3 |  |  | $ | 0.4 |  |  | $ | 0.2 |  |  | $ | 5.5 |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration