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Derivative Financial Instruments | 3 Months Ended
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Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments During the three months ended June 30, 2018, the Company early-adopted the new hedge accounting guidance prescribed by ASU 2017-12. The cumulative impact of adoption, which related to elimination of ineffectiveness for the Company’s designated forward foreign currency exchange contracts, was recorded within retained earnings as of the beginning of Fiscal 2019. See Note 2 for additional information. Forward Foreign Currency Exchange Contracts The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company does not enter into derivative contracts for trading or speculative purposes. Net Investment Hedges During the three months ended June 30, 2018, the Company entered into fixed-to-fixed cross-currency swap agreements with notional amounts of $290.0 million and $44.0 million to hedge its net investments in Euro-denominated and Japanese Yen-denominated subsidiaries, respectively, against future volatility in the exchange rates between U.S. Dollar and these currencies. Under the terms of these contracts, which mature in November 2024, the Company will exchange the quarterly fixed rate payments made under its Senior Notes for fixed rate payments of 1.585% in Euros and 0.89% in Japanese Yen. These contracts have been designated as net investment hedges. The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of June 30, 2018 and March 31, 2018 (in millions):
|  |  |  |  | Fair Values |
| Notional Amounts |  | Assets |  | Liabilities |
| June 30, 2018 |  | March 31, 2018 |  | June 30, 2018 |  | March 31, 2018 |  | June 30, 2018 |  | March 31, 2018 |
Designated forward currency exchange contracts | $ | 132.1 |  |  | $ | 161.7 |  |  | $ | 3.5 |  | (1) | $ | — |  |  | $ | 0.1 |  | (2) | $ | 7.7 |  | (2)
Designated net investment hedge | 334.0 |  |  | — |  |  | 4.8 |  | (3) | — |  |  | — |  |  | — |  |
Total designated hedges | $ | 466.1 |  |  | $ | 161.7 |  |  | $ | 8.3 |  |  | $ | — |  |  | $ | 0.1 |  |  | $ | 7.7 |  |
Undesignated forward currency exchange contracts | 21.3 |  |  | — |  |  | 0.3 |  | (1) | — |  |  | — |  |  | — |  |
Total | $ | 487.4 |  |  | $ | 161.7 |  |  | $ | 8.6 |  |  | $ | — |  |  | $ | 0.1 |  |  | $ | 7.7 |  |
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(1) | Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.
(2) | Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.
(3) | Recorded within other assets in the Company’s consolidated balance sheets.
The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance sheets on a gross basis, as shown in the above table. However, if the Company were to offset and record the asset and liability balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which provide for the right to setoff amounts for similar transactions denominated in the same currencies, the resulting impact as of June 30, 2018 and March 31, 2018 would be as follows (in millions):
| Forward Currency Exchange Contracts |  | Net Investment Hedges
| June 30, 2018 |  | March 31, 2018 |  | June 30, 2018 |  | March 31, 2018
Assets subject to master netting arrangements | $ | 3.8 |  |  | $ | — |  |  | $ | 4.8 |  |  | $ | — |
Liabilities subject to master netting arrangements | $ | 0.1 |  |  | $ | 7.7 |  |  | $ | — |  |  | $ | — |
Derivative assets, net | $ | 3.7 |  |  | $ | — |  |  | $ | 4.8 |  |  | $ | — |
Derivative liabilities, net | $ | — |  |  | $ | 7.7 |  |  | $ | — |  |  | $ | — |
The Company’s master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties. Changes in the fair value of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations and comprehensive income (loss). The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets. Upon discontinuation of the hedge, such amounts remain in CTA until the related investment is sold or liquidated. The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges (in millions):
| Three Months Ended
| June 30, 2018 |  | July 1, 2017
| Pre-Tax Gains Recognized in OCI |  | Pre-Tax Losses Recognized in OCI
Designated forward foreign currency exchange contracts | $ | 8.7 |  |  | $ | (9.3 | )
Designated net investment hedges | $ | 4.8 |  |  | $ | — |
The following table summarizes the impact of the gains and losses within the consolidated statements of operations and comprehensive income related to the designated forward foreign currency exchange contracts for the three months ended June 30, 2018 and July 1, 2017 (in millions):
| Pre-Tax (Gain) Loss Reclassified from Accumulated OCI |  | Location of (Gain) Loss recognized |  | Total Cost of Sales
| June 30, 2018 |  | July 1, 2017 |  |  | June 30, 2018 |  | July 1, 2017
Designated forward currency exchange contracts | $ | 4.9 |  |  | $ | (1.9 | ) |  | Cost of Sales |  | $ | 451.7 |  |  | $ | 377.7 |
The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive income (loss) for its forward currency exchange contracts will be reclassified into earnings during the next twelve months, based upon the timing of inventory purchases and turnover. During the three months ended June 30, 2018 and July 1, 2017, the Company recognized a net gain of $1.1 million and a net loss of $1.4 million, respectively, related to changes in the fair value of undesignated forward currency exchange contracts within foreign currency loss (gain) in the Company’s consolidated statement of operations and comprehensive income. When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense in the Company’s consolidated statements of operations and comprehensive income. Accordingly, the Company recorded a $1.4 million reduction in interest expense during the three months ended June 30, 2018.

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- 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
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