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Derivative Financial Instruments | 6 Months Ended
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Sep. 30, 2023
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 currencies 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 2024, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $2.5 billion to hedge its net investment in Swiss Franc (“CHF”) denominated subsidiaries. Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0% in CHF. These contracts have maturity dates between September 2024 and June 2028 and are designated as net investment hedges. During the first quarter of Fiscal 2024, the Company entered into multiple float-to-float cross-currency swap agreements with aggregate notional amounts of $1.0 billion to hedge its net investment in Euro denominated subsidiaries. The Company will exchange Euro floating rate payments based on EURIBOR for the United States dollar floating rate amounts based on SOFR CME Term over the life of the agreement. The fixed rate component of semi-annual Euro payments range from 1.149% to 1.215%. These contracts have maturity dates between May 2028 and August 2030 and are designated as net investment hedges. During the first quarter of Fiscal 2024, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with an aggregate notional amount of $350 million to hedge its net investment in Euro denominated subsidiaries. Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0% in Euro. These contracts have maturity dates between January 2027 and April 2027 and have been designated as net investment hedges. During the first quarter of Fiscal 2024, the Company entered into a fixed-to-fixed cross-currency swap agreement with an aggregate notional amount of €150 million to hedge its net investment in British Pound (“GBP”) denominated subsidiaries (the “GBP/EUR Net Investment Hedges”). As of September 30, 2023, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of €1.15 billion to hedge its net investment in GBP denominated subsidiaries. Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP notional amounts for fixed rate payments of 0.0% in Euro. These contracts have maturity dates between November 2024 and November 2027 and are designated as net investment hedges. As of September 30, 2023, the Company had Japanese Yen net investment hedges with aggregate notional amounts of $294 million. Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States notional amounts for fixed rate payments of 0% to 2.665% in Japanese Yen. These contracts have maturity dates between May 2027 and February 2051 and are 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 September 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. 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 $25 million and $40 million during the three and six months ended September 30, 2023, respectively. Additionally, the Company recorded interest income of $11 million and $28 million during the three and six months ended October 1, 2022, respectively. Fair Value Hedges The Company is exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans which will impact earnings on a consolidated basis. To manage the foreign currency exchange rate risk related to these balances, the Company entered into fair value cross-currency swap agreements to hedge its exposure in GBP denominated subsidiaries (the “GBP Fair Value Hedge”) on a Euro denominated intercompany loan. As of September 30, 2023, the total notional values of outstanding fair value cross-currency swaps related to these loans were €1 billion. Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP notional amounts for fixed rate payments of 0% in Euro. These contracts have maturity dates between March 2025 and March 2026 and are designated as fair value hedges. When a cross-currency swap is designated as a fair value hedge and qualifies as highly effective, the fair value hedge will be recorded at fair value each period on the Company’s consolidated balance sheets, with the difference resulting from the changes in the spot rate recognized in foreign currency (gain) loss on the Company’s consolidated statements of operations and comprehensive income, which will offset the earnings impact of the underlying transaction being hedged. Accordingly, the Company recorded a foreign currency loss of $7 million and a foreign currency gain of $21 million during the three and six months ended September 30, 2023, 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 September 30, 2023 and April 1, 2023 (in millions):
|  |  |  |  | Fair Value |  |
| Notional Amounts |  | Assets |  | Liabilities |  |
| September 30, 2023 |  | April 1, 2023 |  | September 30, 2023 |  | April 1, 2023 |  | September 30, 2023 |  | April 1, 2023 |  |
Designated net investment hedges | $ | 5,360 |  |  | $ | 1,378 |  |  | $ | 40 |  | (1) | $ | 1 |  | (2) | $ | 49 |  | (3) | $ | 36 |  | (3) |
Designated fair value hedges | 1,057 |  |  | 1,084 |  |  | 5 |  | (2) | — |  |  | — |  |  | 3 |  | (3) |
Total | $ | 6,417 |  |  | $ | 2,462 |  |  | $ | 45 |  |  | $ | 1 |  |  | $ | 49 |  |  | $ | 39 |  |  |
(1)As of September 30, 2023, the Company recorded $1 million within prepaid expenses and other current assets and $39 million within other 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. 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 September 30, 2023 and April 1, 2023 would be as follows (in millions):
|  |  | Net Investment Hedges |  | Fair Value Hedges |  |
|  |  |  |  | September 30, 2023 |  | April 1, 2023 |  | September 30, 2023 |  | April 1, 2023 |  |  |  |
Assets subject to master netting arrangements |  |  |  |  | $ | 40 |  |  | $ | 1 |  |  | $ | 5 |  |  | $ | — |  |  |  |  |
Liabilities subject to master netting arrangements |  |  |  |  | $ | 49 |  |  | $ | 36 |  |  | $ | — |  |  | $ | 3 |  |  |  |  |
Derivative assets, net |  |  |  |  | $ | 30 |  |  | $ | 1 |  |  | $ | 5 |  |  | $ | — |  |  |  |  |
Derivative liabilities, net |  |  |  |  | $ | 39 |  |  | $ | 36 |  |  | $ | — |  |  | $ | 3 |  |  |  |  |
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 net investment is sold or liquidated. The net gain or loss on cross-currency swap contracts designated as fair value hedges and associated with cross-currency intercompany loans are recognized within foreign currency (gain) loss on the Company’s consolidated statements of operations and comprehensive income generally in the period in which the related balances being hedged are revalued. 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 |  | Six Months Ended
| September 30, 2023 |  | October 1, 2022 |  | September 30, 2023 |  | October 1, 2022
| Pre-Tax Gains Recognized in OCI |  | Pre-Tax Gains Recognized in OCI |  | Pre-Tax Gains (Losses) Recognized in OCI |  | Pre-Tax Gains Recognized in OCI
Designated forward foreign currency exchange contracts | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | 11 |
Designated net investment hedges | $ | 79 |  |  | $ | 152 |  |  | $ | 25 |  |  | $ | 365 |
Designated fair value hedge | $ | 16 |  |  | $ | — |  |  | $ | (9) |  |  | $ | — |
The following tables summarize the pre-tax impact of the gains within the consolidated statements of operations and comprehensive income related to the designated forward foreign currency exchange contracts for the three and six months ended September 30, 2023 and October 1, 2022 (in millions):
| Three Months Ended
| Pre-Tax Gain Reclassified from Accumulated OCI |  | Location of Gain Recognized
| September 30, 2023 |  | October 1, 2022 |
Designated forward foreign currency exchange contracts | $ | 1 |  |  | $ | 3 |  |  | Cost of goods sold
| Six Months Ended
| Pre-Tax Gain Reclassified from Accumulated OCI |  | Location of Gain Recognized
| September 30, 2023 |  | October 1, 2022 |
Designated forward foreign currency exchange contracts | $ | 4 |  |  | $ | 7 |  |  | 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 both the three and six months ended September 30, 2023, there was no gain or loss recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income as there were no undesignated hedges outstanding. During the three months ended October 1, 2022, there was no gain recognized within foreign currency (gain) loss in the Company’s consolidated statements of operations and comprehensive income, while during the six months ended October 1, 2022, a $2 million gain was recognized within foreign currency (gain) 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.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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