XML 29 R18.htm IDEA: XBRL DOCUMENT
v3.22.2

Derivative Financial Instruments | 3 Months Ended
--- | ---
Jul. 02, 2022
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 2023, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $1.094 billion to hedge its net investment, of which $900 million was in Euro denominated subsidiaries and $194 million was in Japanese-Yen denominated subsidiaries. The modification of these swaps resulted in the Company receiving $66 million in cash during the first quarter of Fiscal 2023. 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 2027. 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. As of July 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 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 2.872% in Euros and 1.061% to 2.858% in Japanese Yen. These contracts have maturity dates between March 2024 and February 2051 and 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. Accordingly, the Company recorded interest income of $17 million and $12 million during the three months ended July 2, 2022 and June 26, 2021, respectively. 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 July 2, 2022 and April 2, 2022 (in millions):
|  |  |  |  | Fair Values |  |
| Notional Amounts |  | Assets |  | Liabilities |  |
| July 2, 2022 |  | April 2, 2022 |  | July 2, 2022 |  | April 2, 2022 |  | July 2, 2022 |  | April 2, 2022 |  |
Designated forward foreign currency exchange contracts | $ | 100 |  |  | $ | 119 |  |  | $ | 8 |  | (1) | $ | 4 |  | (1) | $ | — |  |  | $ | — |  |  |
Designated net investment hedges | 4,194 |  |  | 4,194 |  |  | 166 |  | (2) | 44 |  | (2) | 4 |  | (3) | 37 |  | (3) |
Total designated hedges | 4,294 |  |  | 4,313 |  |  | 174 |  |  | 48 |  |  | 4 |  |  | 37 |  |  |
Undesignated derivative contracts (4) | 10 |  |  | 38 |  |  | 1 |  |  | 4 |  |  | — |  |  | — |  |  |
Total | $ | 4,304 |  |  | $ | 4,351 |  |  | $ | 175 |  |  | $ | 52 |  |  | $ | 4 |  |  | $ | 37 |  |  |
(1)Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets. (2)Recorded within other assets in the Company’s consolidated balance sheets. (3)Recorded within other long-term liabilities in the Company’s consolidated balance sheets. (4)Represents 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 July 2, 2022 and April 2, 2022 would be as follows (in millions):
| Forward Currency Exchange Contracts |  | Net Investment Hedges |  |
| July 2, 2022 |  | April 2, 2022 |  | July 2, 2022 |  | April 2, 2022 |  |  |  |
Assets subject to master netting arrangements | $ | 9 |  |  | $ | 8 |  |  | $ | 166 |  |  | $ | 44 |  |  |  |  |
Liabilities subject to master netting arrangements | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | 37 |  |  |  |  |
Derivative assets, net | $ | 9 |  |  | $ | 8 |  |  | $ | 166 |  |  | $ | 42 |  |  |  |  |
Derivative liabilities, net | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | 35 |  |  |  |  |
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. The net gain or loss on net investment hedges are reported within 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. 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
| July 2, 2022 |  | June 26, 2021
| Pre-Tax Gains Recognized in OCI |  | Pre-Tax Gains (Losses) Recognized in OCI
Designated forward foreign currency exchange contracts | $ | 6 |  |  | $ | (1) |
Designated net investment hedges | $ | 213 |  |  | $ | 83 |
The following tables summarize the pre-tax 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 July 2, 2022 and June 26, 2021 (in millions):
| Three Months Ended
| Pre-Tax (Gain) Loss Reclassified from Accumulated OCI |  | Location of (Gain) Loss Recognized
| July 2, 2022 |  | June 26, 2021 |
Designated forward foreign currency exchange contracts | $ | (4) |  |  | $ | 1 |  |  | 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 HedgesDuring the three months ended July 2, 2022, a $2 million gain was recognized within foreign currency loss in the Company’s consolidated statements of operations and comprehensive income as a result of the changes in the fair value of undesignated forward foreign currency exchange contracts. During the three months ended June 26, 2021, the net impact of changes in the fair value of undesignated forward foreign currency exchange contracts recognized within foreign currency loss in the Company’s consolidated statements of operations and comprehensive income 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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration