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DERIVATIVES AND FAIR VALUE MEASUREMENTS | 12 Months Ended
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Apr. 02, 2016
Derivatives and Fair Value Measurements [Abstract] |
DERIVATIVES AND FAIR VALUE MEASUREMENTS | DERIVATIVES AND FAIR VALUE MEASUREMENTS We manufacture, market and sell our products globally. For the fiscal year ended April 2, 2016, 42.9% of our sales were generated outside the U.S. in local currencies. We also incur certain manufacturing, marketing and selling costs in international markets in local currency. Accordingly, our earnings and cash flows are exposed to market risk from changes in foreign currency exchange rates relative to the U.S. Dollar, our reporting currency. We have a program in place that is designed to mitigate our exposure to changes in foreign currency exchange rates. That program includes the use of derivative financial instruments to minimize for a period of time, the impact on our financial results from changes in foreign exchange rates. We utilize foreign currency forward contracts to hedge the anticipated cash flows from transactions denominated in foreign currencies, primarily the Japanese Yen and the Euro, and to a lesser extent the Swiss Franc, Australian Dollar, British Pound Sterling, Canadian Dollar and the Mexican Peso. This does not eliminate the impact of the volatility of foreign exchange rates, but because we generally enter into forward contracts one year out, rates are fixed for a one-year period, thereby facilitating financial planning and resource allocation. Designated Foreign Currency Hedge Contracts All of our designated foreign currency hedge contracts as of April 2, 2016 and March 28, 2015 were cash flow hedges under ASC Topic 815, Derivatives and Hedging. We record the effective portion of any change in the fair value of designated foreign currency hedge contracts in other comprehensive (loss) income until the related third-party transaction occurs. Once the related third-party transaction occurs, we reclassify the effective portion of any related gain or loss on the designated foreign currency hedge contracts to earnings. In the event the hedged forecasted transaction does not occur, or it becomes probable that it will not occur, we would reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. We had designated foreign currency hedge contracts outstanding in the contract amount of $107.4 million as of April 2, 2016 and $145.8 million as of March 28, 2015. During fiscal 2016, we recognized net gains of $8.8 million in earnings on our cash flow hedges, compared to recognized net gains of $6.5 million and $8.6 million during fiscal 2015 and 2014, respectively. For the fiscal year ended April 2, 2016, a $3.9 million loss, net of tax, was recorded in accumulated other comprehensive (loss) income to recognize the effective portion of the fair value of any designated foreign currency hedge contracts that are, or previously were, designated as foreign currency cash flow hedges, as compared to a gain of $12.2 million, net of tax, for the fiscal year ended March 28, 2015 and a gain of $3.7 million, net of tax, for the fiscal year ended March 29, 2014. At April 2, 2016, losses of $3.9 million, net of tax, will be reclassified to earnings within the next twelve months. All currency cash flow hedges outstanding as of April 2, 2016 mature within twelve months. Non-Designated Foreign Currency Contracts We manage our exposure to changes in foreign currency on a consolidated basis to take advantage of offsetting transactions and balances. We use foreign currency forward contracts as a part of our strategy to manage exposure related to foreign currency denominated monetary assets and liabilities. These foreign currency forward contracts are entered into for periods consistent with currency transaction exposures, generally one month. They are not designated as cash flow or fair value hedges under ASC Topic 815. These forward contracts are marked-to-market with changes in fair value recorded to earnings. We had non-designated foreign currency hedge contracts under ASC Topic 815 outstanding in the contract amount of $48.8 million as of April 2, 2016 and $52.6 million as of March 28, 2015. Interest Rate Swaps On August 1, 2012, we entered into a credit agreement, as amended June 30, 2014, which provided for a term loan ("Credit Agreement"). Under the terms of this Credit Agreement, we may borrow at a spread to an index, including the LIBOR index of 1-month, 3-months, 6-months, etc. From the date of the Credit Agreement, we have chosen to borrow against the 1-month USD-LIBOR-BBA rounded up, if necessary, to the nearest 1/16 th of 1% (“Adjusted LIBOR”). The terms of the Credit Agreement allow us to borrow in multiple tranches. Accordingly, our earnings and cash flows are exposed to interest rate risk from changes in Adjusted LIBOR. Part of our interest rate risk management strategy includes the use of interest rate swaps to mitigate our exposure to changes in variable interest rates. Our objective in using interest rate swaps is to add stability to interest expense and to manage and reduce the risk inherent in interest rate fluctuations. We formally document our hedge relationships (including identifying the hedged instrument and hedged item) at hedge inception to ensure that our interest rate swaps qualify for hedge accounting. On a quarterly basis, we assess whether the interest rate swaps are highly effective in offsetting changes in the cash flow of the hedged item. We do not hold or issue interest rate swaps for trading purposes. We manage the credit risk of the counterparties by dealing only with institutions that we consider financially sound and consider the risk of non-performance to be remote. On December 21, 2012, we entered into two interest rate swap agreements (the "Swaps"), whereby we receive Adjusted LIBOR and pay an average fixed rate of 0.68% on a total notional value of $250.0 million of debt. The Swaps mature on August 1, 2017. We designated the Swaps as cash flow hedges of variable interest rate risk associated with $250.0 million of indebtedness. For the fiscal year ended April 2, 2016, an insignificant gain was recorded in Accumulated Other Comprehensive (Loss) Income to recognize the effective portion of the fair value of the Swaps that qualify as cash flow hedges. For fiscal years ended March 28, 2015 and March 29, 2014, a loss of $0.9 million and a gain of $1.3 million, respectively, net of tax, were recorded in Accumulated Other Comprehensive (Loss) Income for this effective portion. Fair Value of Derivative Instruments The following table presents the effect of our derivative instruments designated as cash flow hedges and those not designated as hedging instruments under ASC Topic 815 in our consolidated statements of (loss) income and comprehensive (loss) income for the fiscal year ended April 2, 2016.
Derivative Instruments |  | Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive (Loss) Income |  | Amount of Gain Reclassified from Accumulated Other Comprehensive (Loss) Income into Earnings |  | Location in Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income |  | Amount of Gain (Loss) Excluded from Effectiveness Testing (*) |  | Location in Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(In thousands) |  |  |  |  |  |  |  |  |  |
Designated foreign currency hedge contracts, net of tax |  | $ | (3,940 | ) |  | $ | 8,822 |  |  | Net revenues, COGS, and SG&A |  | $ | 102 |  |  | Other expense, net
Non-designated foreign currency hedge contracts |  | — |  |  | — |  |  |  |  | $ | (203 | ) |  | Other expense, net
Designated interest rate swaps, net of tax |  | $ | 2 |  |  | $ | — |  |  | Other expense, net |  | $ | — |  |  |
(*) |  | We exclude the difference between the spot rate and hedge forward rate from our effectiveness testing.
We did not have fair value hedges or net investment hedges outstanding as of April 2, 2016 or March 28, 2015. As of April 2, 2016, the amount recognized as a deferred tax asset for designated foreign currency hedges was $0.3 million. ASC Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures, by considering the estimated amount we would receive or pay to sell or transfer these instruments at the reporting date and by taking into account current interest rates, currency exchange rates, current interest rate curves, interest rate volatilities, the creditworthiness of the counterparty for assets, and our creditworthiness for liabilities. In certain instances, we may utilize financial models to measure fair value. Generally, we use inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; other observable inputs for the asset or liability; and inputs derived principally from, or corroborated by, observable market data by correlation or other means. As of April 2, 2016, we have classified our derivative assets and liabilities within Level 2 of the fair value hierarchy prescribed by ASC Topic 815, as discussed below, because these observable inputs are available for substantially the full term of our derivative instruments. The following tables present the fair value of our derivative instruments as they appear in our consolidated balance sheets:
(In thousands) | Location in Balance Sheet |  | Balance as of April 2, 2016 |  | Balance as of March 28, 2015
Derivative Assets: |  |  |  |  |  |  |
Designated foreign currency hedge contracts | Other current assets |  | $ | 427 |  |  | $ | 9,740 |
Designated interest rate swaps | Other current assets |  | — |  |  | — |
|  |  | $ | 427 |  |  | $ | 9,740 |
Derivative Liabilities: |  |  |  |  |  |  |
Designated foreign currency hedge contracts | Other current liabilities |  | $ | 4,056 |  |  | $ | 2,499 |
Designated interest rate swaps | Other current liabilities |  | 154 |  |  | 159 |
|  |  | $ | 4,210 |  |  | $ | 2,658 |
Other Fair Value Measurements ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. ASC Topic 820 does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value measurements. In accordance with ASC Topic 820, for the fiscal years ended April 2, 2016 and March 28, 2015, we applied the requirements under ASC Topic 820 to our non-financial assets and non-financial liabilities. On a recurring basis, we measure certain financial assets and financial liabilities at fair value, including our money market funds, foreign currency hedge contracts, and contingent consideration. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We base fair value upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
• | Level 1 — Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.
• | Level 2 — Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.
• | Level 3 — Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.
Our money market funds carried at fair value are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Fair Value Measured on a Recurring Basis Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following:
As of April 2, 2016 | Level 1 |  | Level 2 |  | Level 3 |  | Total
(In thousands) |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Money market funds | $ | 72,491 |  |  | $ | — |  |  | $ | — |  |  | $ | 72,491 |
Designated foreign currency hedge contracts | — |  |  | 427 |  |  | — |  |  | 427 |
| $ | 72,491 |  |  | $ | 427 |  |  | $ | — |  |  | $ | 72,918 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Designated foreign currency hedge contracts | $ | — |  |  | $ | 4,056 |  |  | $ | — |  |  | $ | 4,056 |
Designated interest rate swaps | — |  |  | 154 |  |  | — |  |  | 154 |
Contingent consideration | — |  |  | — |  |  | — |  |  | — |
| $ | — |  |  | $ | 4,210 |  |  | $ | — |  |  | $ | 4,210 |
As of March 28, 2015 | Level 1 |  | Level 2 |  | Level 3 |  | Total
(In thousands) |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Money market funds | $ | 119,946 |  |  | $ | — |  |  | $ | — |  |  | $ | 119,946 |
Designated foreign currency hedge contracts | — |  |  | 9,740 |  |  | — |  |  | 9,740 |
| $ | 119,946 |  |  | $ | 9,740 |  |  | $ | — |  |  | $ | 129,686 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Forward currency hedge contracts | $ | — |  |  | $ | 2,499 |  |  | $ | — |  |  | $ | 2,499 |
Designated interest rate swaps | — |  |  | 159 |  |  | — |  |  | 159 |
Contingent consideration | — |  |  | — |  |  | 4,727 |  |  | 4,727 |
| $ | — |  |  | $ | 2,658 |  |  | $ | 4,727 |  |  | $ | 7,385 |
For the fiscal years ended April 2, 2016 and March 28, 2015, non-designated foreign currency hedge contracts were not significant and are not disclosed separately in the above tables. Contingent consideration Contingent consideration liabilities are measured at fair value using projected revenues, discount rates, probabilities of payment and projected payment dates. This Level 3 fair value measurement was performed using a probability-weighted discounted cash flow over a ten year period. Increases or decreases in the fair value of our contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of revenue estimates or likelihood of earning revenue. Projected revenues are based on our most recent internal operational budgets. The table below provides a reconciliation of the beginning and ending Level 3 liabilities for the year ended April 2, 2016.
(In thousands) |  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at March 28, 2015 |  | $ | 4,727 |
Fair value adjustment |  | (4,727 | )
Balance at April 2, 2016 |  | $ | — |
As discussed in Note 5, Goodwill and Intangible Assets, during fiscal 2016, we reversed the remaining $4.9 million of contingent consideration liability associated with the SOLX asset, as we do not expect to achieve the conditions that called for its payment. This reversal, as well as the fair value adjustment recorded earlier in fiscal 2016, are included within the contingent consideration (income) expense line on the consolidated statements of (loss) income for fiscal 2016. Other Fair Value Disclosures The Term Loan (which is carried at amortized cost), accounts receivable and accounts payable approximate fair value. Details pertaining to the Term Loan can be found in Note 7, Notes Payable and Long-Term Debt.

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