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Derivatives | 9 Months Ended
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Jun. 25, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Interest Rate Swap - 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 swaps, 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 Income. In fiscal 2019, in order to hedge a portion of its variable rate debt, 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 2021 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 an asset position of $28.6 million as of June 25, 2022. 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 cash and 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 contracts. The change in the fair value of these contracts is recognized directly in the Consolidated Statements of Income as a component of other income (expense), net. Realized and unrealized gains and losses from these contracts, which were the only derivative contracts not designated for hedge accounting, for the three and nine months ended June 25, 2022 and June 26, 2021, respectively, were as follows:
| Three Months Ended |  | Nine Months Ended
| June 25, 2022 |  | June 26, 2021 |  | June 25, 2022 |  | June 26, 2021
Amount of realized gain (loss) recognized in income |  |  |  |  |  |  |
Forward foreign currency contracts | $ | 19.6 |  |  | $ | (7.0) |  |  | $ | 42.4 |  |  | $ | (6.5) |
Foreign currency option contracts | — |  |  | (1.4) |  |  | — |  |  | (4.4) |
| $ | 19.6 |  |  | $ | (8.4) |  |  | $ | 42.4 |  |  | $ | (10.9) |
Amount of unrealized gain (loss) recognized in income |  |  |  |  |  |  |
Forward foreign currency contracts | $ | 2.5 |  |  | $ | 1.5 |  |  | $ | 9.2 |  |  | $ | (2.0) |
Foreign currency option contracts | — |  |  | 0.4 |  |  | — |  |  | (5.5) |
| $ | 2.5 |  |  | $ | 1.9 |  |  | $ | 9.2 |  |  | $ | (7.5) |
Amount of gain (loss) recognized in income |  |  |  |  |  |  |
Total | $ | 22.1 |  |  | $ | (6.5) |  |  | $ | 51.6 |  |  | $ | (18.4) |
As of June 25, 2022, the Company had outstanding forward foreign currency contracts that were not designated for hedge accounting and are used to hedge fluctuations in the U.S. dollar of certain of the Company's cash balances denominated in the Euro and UK pound, as well as forecasted transactions denominated in the Euro, UK Pound, Australian Dollar, Canadian Dollar, Chinese Yuan and Japanese Yen with an aggregate notional amount of $330.2 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 June 25, 2022:
| Balance Sheet Location |  | June 25, 2022 |  | September 25, 2021
Assets: |  |  |  |  |
Derivative instruments designated as a cash flow hedge: |  |  |  |  |
Interest rate swap contract | Prepaid expenses and other current assets |  | $ | 19.0 |  |  | $ | — |
Interest rate swap contract | Other assets |  | 9.6 |  |  | — |
|  |  | $ | 28.6 |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |
Forward foreign currency contracts | Prepaid expenses and other current assets |  | $ | 10.3 |  |  | $ | 1.7 |
|  |  | $ | 10.3 |  |  | $ | 1.7 |
Liabilities: |  |  |  |  |
Derivative instruments designated as a cash flow hedge: |  |  |  |  |
Interest rate swap contract | Accrued expenses |  | $ | — |  |  | $ | 11.1 |
Interest rate swap contract | Other long-term liabilities |  | — |  |  | 7.6 |
Total |  |  | $ | — |  |  | $ | 18.7 |
Derivatives not designated as hedging instruments: |  |  |  |  |
Forward foreign currency contracts | Accrued expenses |  | $ | — |  |  | $ | 0.6 |
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 |  | Nine Months Ended
| June 25, 2022 |  | June 26, 2021 |  | June 25, 2022 |  | June 26, 2021
Amount of gain (loss) recognized in other comprehensive income, net of taxes: |  |  |  |  |  |  |
Interest rate swap | $ | 8.4 |  |  | $ | 3.0 |  |  | $ | 35.7 |  |  | $ | 8.2 |
Interest rate cap agreements | — |  |  | — |  |  | — |  |  | (0.2) |
Total | $ | 8.4 |  |  | $ | 3.0 |  |  | $ | 35.7 |  |  | $ | 8.0 |

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- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 Reference 2: 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
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