XML 33 R18.htm IDEA: XBRL DOCUMENT
v3.21.2

Derivative Financial Instruments | 6 Months Ended
--- | ---
Sep. 25, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments 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 first quarter of Fiscal 2022, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $2.875 billion to hedge its net investment in Euro denominated subsidiaries. Certain of these contracts are supported by a credit support annex ("CSA") which provides for collateral exchange with the earliest effective date being May 2023. If the outstanding position of a contract exceeds a certain threshold governed by the aforementioned CSA's, either party is required to post cash collateral. Due to an-other-than-insignificant financing element on certain of these modified contracts, the net interest cash inflows of $8 million during the six months ended September 25, 2021 related to these contracts are classified as financing activities in the Company’s consolidated statements of cash flows. As of September 25, 2021, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $4 billion to hedge its net investment in Euro denominated subsidiaries and $194 million to hedge its net investment in Japanese Yen denominated subsidiaries against future volatility in the exchange rates between the U.S. Dollar and these currencies. Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on U.S. denominated debt for fixed rate payments of 0% to 4.457% in Euros and 0% to 3.588% in Japanese Yen. Certain of these contracts include mandatory early termination dates between February 2024 and February 2026, while the remaining contracts have maturity dates between March 2024 and August 2050. These contracts have been designated as net investment hedges. 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 (loss). Accordingly, the Company recorded a reduction in interest expense of $15 million and $27 million during the three and six months ended September 25, 2021, respectively, and $2 million during both the three and six months ended September 26, 2020. This increase from prior year is primarily due to the Company having higher average notional amounts outstanding on these hedges. Interest Rate Swap As of September 25, 2021, the Company had an interest rate swap with an initial notional amount of $500 million that will decrease to $350 million in April 2022. The swap was designated as a cash flow hedge designed to mitigate the impact of adverse interest rate fluctuations for a portion of the Company’s variable-rate debt equal to the notional amount of the swap. The interest rate swap converts the one-month adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through December 2022. When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive income and are reclassified into interest expense in the same period during which the hedged transactions affect earnings. During the three and six months ended September 25, 2021 and September 26, 2020, the Company recorded an immaterial amount of net interest expense related to this agreement. 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 September 25, 2021 and March 27, 2021 (in millions):
|  |  |  |  | Fair Values |  |
| Notional Amounts |  | Assets |  | Liabilities |  |
| September 25, 2021 |  | March 27, 2021 |  | September 25, 2021 |  | March 27, 2021 |  | September 25, 2021 |  | March 27, 2021 |  |
Forward foreign currency exchange contracts | $ | 119 |  |  | $ | 155 |  |  | $ | 4 |  | (1) | $ | 2 |  | (1) | $ | — |  |  | $ | 1 |  | (2) |
Net investment hedges | 4,194 |  |  | 3,194 |  |  | 33 |  | (3) | 3 |  | (3) | 118 |  | (4) | 263 |  | (4) |
Interest rate swap | 500 |  |  | 500 |  |  | — |  |  | — |  |  | — |  |  | 1 |  | (4) |
Total designated hedges | 4,813 |  |  | 3,849 |  |  | 37 |  |  | 5 |  |  | 118 |  |  | 265 |  |  |
Undesignated derivative contracts (5) | 22 |  |  | 13 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |
Total | $ | 4,835 |  |  | $ | 3,862 |  |  | $ | 37 |  |  | $ | 5 |  |  | $ | 118 |  |  | $ | 265 |  |  |
(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. (4)Recorded within other long-term liabilities in the Company’s consolidated balance sheets. (5)Primarily includes undesignated hedges of inventory purchases. 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 previous 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 set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of September 25, 2021 and March 27, 2021 would be as follows (in millions):
| Forward Currency Exchange Contracts |  | Net Investment Hedges |  | Interest Rate Swaps
| September 25, 2021 |  | March 27, 2021 |  | September 25, 2021 |  | March 27, 2021 |  | September 25, 2021 |  | March 27, 2021
Assets subject to master netting arrangements | $ | 4 |  |  | $ | 2 |  |  | $ | 33 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Liabilities subject to master netting arrangements | $ | — |  |  | $ | 1 |  |  | $ | 118 |  |  | $ | 263 |  |  | $ | — |  |  | $ | 1 |
Derivative assets, net | $ | 4 |  |  | $ | 1 |  |  | $ | 29 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Derivative liabilities, net | $ | — |  |  | $ | — |  |  | $ | 114 |  |  | $ | 263 |  |  | $ | — |  |  | $ | 1 |
Currently, 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 and are reclassified from accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of goods sold 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 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. Changes in the fair value of the Company’s interest rate swaps that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income and are reclassified from accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of operations and comprehensive income (loss). The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts, net investment hedges and interest rate swaps (in millions):
| Three Months Ended |  | Six Months Ended
| September 25, 2021 |  | September 26, 2020 |  | September 25, 2021 |  | September 26, 2020
| Pre-Tax Gains Recognized in OCI |  | Pre-Tax Losses Recognized in OCI |  | Pre-Tax Gains Recognized in OCI |  | Pre-Tax Losses Recognized in OCI
Designated forward foreign currency exchange contracts | $ | 3 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |
Designated net investment hedges | $ | 89 |  |  | $ | (42) |  |  | $ | 172 |  |  | $ | (42) |
Designated interest rate swaps | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |
The following tables summarize the pre-tax impact of the gains and losses within the consolidated statements of operations and comprehensive income (loss) related to the designated forward foreign currency exchange contracts for the three and six months ended September 25, 2021 and September 26, 2020 (in millions):
| Three Months Ended
| Pre-Tax Loss (Gain) Reclassified from Accumulated OCI |  | Location of Gain Recognized
| September 25, 2021 |  | September 26, 2020 |
Designated forward foreign currency exchange contracts | $ | 1 |  |  | $ | (2) |  |  | Cost of goods sold
| Six Months Ended
| Pre-Tax Loss (Gain) Reclassified from Accumulated OCI |  | Location of Gain recognized
| September 25, 2021 |  | September 26, 2020 |
Designated forward foreign currency exchange contracts | $ | 2 |  |  | $ | (3) |  |  | Cost of goods sold
The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive income for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and turnover. Undesignated Hedges During the three and six months ended September 25, 2021 and September 26, 2020, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss (gain) in the Company’s consolidated statements of operations and comprehensive income (loss) was immaterial.

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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration