Derivative Instruments

6 Months Ended

Mar. 29, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS:

The Company enters into contractual derivative arrangements to manage changes in market conditions related to interest on debt obligations, including interest rate swap agreements, that are recognized as either assets or liabilities on the balance sheet at fair value at the end of each quarter. The counterparties to the Company's contractual derivative agreements are all major international financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company continually monitors its positions and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties. The Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively for designated hedges. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.

Cash Flow Hedges

The Company has $2.3 billion notional amount of outstanding interest rate swap agreements as of March 29, 2024, which fix the rate on a like amount of variable rate borrowings with varying maturities through December of fiscal 2028. During the second quarter of fiscal 2024, $100.0 million notional amount of previously forward starting interest rate swap agreements to hedge the cash flow risk of variability in interest payments on variable rate borrowings became effective.

Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as the underlying hedged item affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of March 29, 2024 and September 29, 2023, $80.9 million and $109.1 million, respectively, of unrealized net of tax gains related to the interest rate swaps were included in "Accumulated other comprehensive loss" on the Condensed Consolidated Balance Sheets.

The following table summarizes the effect of the Company's derivatives designated as cash flow hedging instruments on Other comprehensive income (loss) (in thousands):


	Three Months Ended
	March 29, 2024		March 31, 2023
Interest rate swap agreements	$	31,838	$	(16,315)

	Six Months Ended
	March 29, 2024		March 31, 2023
Interest rate swap agreements	$	(115)	$	(14,331)

The following table summarizes the location and fair value, using Level 2 inputs (see Note 14 for a description of the fair value levels), of the Company's derivatives designated as hedging instruments on the Condensed Consolidated Balance Sheets (in thousands):


	Balance Sheet Location	March 29, 2024		September 29, 2023
ASSETS
Interest rate swap agreements	Prepayments and other current assets	$	23,172	$	—
Interest rate swap agreements	Other Assets	$	86,206	$	147,458

The following table summarizes the location of the gain reclassified from "Accumulated other comprehensive loss" into earnings for derivatives designated as hedging instruments on the Condensed Consolidated Statements of Income (in thousands):


		Three Months Ended
	Income Statement Location	March 29, 2024		March 31, 2023
Interest rate swap agreements	Interest Expense, net	$	(19,199)	$	(13,915)
		Six Months Ended
	Income Statement Location	March 29, 2024		March 31, 2023

Interest rate swap agreements	Interest Expense, net	$	(37,965)	$	(24,230)

As of March 29, 2024, the Company has a Euro denominated term loan in the amount of €65.0 million. The term loan was designated as a hedge of the Company's net Euro currency exposure represented by certain holdings in the Company's European affiliates.

At March 29, 2024, the net of tax gain expected to be reclassified from "Accumulated other comprehensive loss" into earnings over the next twelve months based on current market rates is approximately $45.9 million.