Derivative Financial Instruments

12 Months Ended

Apr. 02, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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. Due to an other-than-insignificant financing element for certain of these modifications, $31 million of net interest cash receipts during Fiscal 2022 related to these contracts were classified as financing activities in the Company’s consolidated statements of cash flows.

During the third and fourth quarter of Fiscal 2022, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $1.5 billion and $2.475 billion, respectively. The modification of these hedges resulted in the Company receiving $59 million and $130 million in cash during the third and fourth quarter of Fiscal 2022, respectively. These amounts are classified within investing activities in the Company’s consolidated statements of cash flows.

As of April 2, 2022, 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 United States dollar and these currencies. Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on United States denominated debt for fixed rate payments of 0% to 3.565% in Euros and 0% to 3.408% in Japanese Yen. Certain of these contracts include mandatory early termination dates between August 2025 and February 2026, while the remaining contracts have maturity dates between March 2024 and February 2051. These contracts have been designated as net investment hedges. Certain of these contracts are supported by a credit support annex (“CSA”) which provides for collateral exchange with the earliest effective date being May 2024. 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.

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 interest income of $63 million, $16 million and $71 million, respectively, during Fiscal 2022, Fiscal 2021 and Fiscal 2020.

Interest Rate Swap

The Company had an interest rate swap with an initial notional amount of $500 million that would have decreased to $350 million in April 2022. The swap was designated as a cash flow hedge 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 converted the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of 0.237% through the date of termination.

During the third quarter of Fiscal 2022, the Company terminated its only interest rate swap. As a result, the Company recognized a $1 million gain within interest (income) expense, net, within the Company’s consolidated statements of operations and comprehensive income (loss).

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 Fiscal 2022 and Fiscal 2021, the Company recorded an immaterial amount of 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 April 2, 2022 and March 27, 2021 (in millions):


					Fair Values
	Notional Amounts				Assets						Liabilities
	April 2, 2022		March 27, 2021		April 2, 2022			March 27, 2021			April 2, 2022			March 27, 2021
Designated forward foreign currency exchange contracts	$	119	$	155	$	4	(1)	$	2	(1)	$	—	(2)	$	1
Designated net investment hedge	4,194		3,194		44		(3)	3		(3)	37		(4)	263
Designated interest rate swap	—		500		—			—			—		(4)	1
Total designated hedges	4,313		3,849		48			5			37			265
Undesignated derivative contracts (5)	38		13		4			—			—			—
Total	$	4,351	$	3,862	$	52		$	5		$	37		$	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 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 set-off amounts for similar transactions denominated in the same currencies and with the same banks, the resulting impact as of April 2, 2022 and March 27, 2021 would be as follows (in millions):


	Forward Currency Exchange Contracts				Net Investment Hedges				Interest Rate Swap
	April 2, 2022		March 27, 2021		April 2, 2022		March 27, 2021		April 2, 2022		March 27, 2021
Assets subject to master netting arrangements	$	8	$	2	$	44	$	3	$	—	$	—
Liabilities subject to master netting arrangements	$	—	$	1	$	37	$	263	$	—	$	1
Derivative assets, net	$	8	$	1	$	42	$	3	$	—	$	—
Derivative liabilities, net	$	—	$	—	$	35	$	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 net 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):


	Fiscal Year Ended April 2, 2022		Fiscal Year Ended March 27, 2021		Fiscal Year Ended March 28, 2020
	Pre-Tax Gains Recognized in OCI		Pre-Tax Losses Recognized in OCI		Pre-Tax Gains Recognized in OCI
Designated forward foreign currency exchange contracts	$	11	$	(2)	$	6
Designated net investment hedges	$	435	$	(263)	$	264
Designated interest rate swaps	$	—	$	(1)	$	—

The following tables summarize the 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 (in millions):


	Fiscal Year Ended
	Pre-Tax Losses (Gains) Reclassified from Accumulated OCI						Location of Losses (Gains) Recognized
	April 2, 2022		March 27, 2021		March 28, 2020
Designated forward currency exchange contracts	$	1	$	(2)	$	(10)	Cost of goods sold

The Company expects that substantially all of the amounts 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 Fiscal 2022 and Fiscal 2021, a gain of $2 million and a loss of $1 million, respectively, were recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income (loss) as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts. During Fiscal 2020, the Company recognized an immaterial amount of net gains.