Derivative Instruments and Hedging Activities

As of March 30, 2018, the Company had outstanding foreign exchange forward contracts that were designated as either cash flow hedges or non-designated hedges. The contract maturity dates of these foreign exchange forward contracts do not exceed 12 months. In addition, the Company had outstanding interest rate swaps that were designated as cash flow hedges. The Company determined the ineffective portion and the amount excluded for effectiveness testing associated with its cash flow hedges to be immaterial to the Condensed Consolidated Financial Statements for the three and nine months ended March 30, 2018 and March 31, 2017.

As of March 30, 2018, the amount of existing net gains related to cash flow hedges recorded in AOCI was $28 million. Over the next twelve months, the Company expects to reclassify the majority of this amount into earnings. In addition, as of March 30, 2018, the Company did not have any foreign exchange forward contracts with credit-risk-related contingent features.

A change in the fair value of non-designated hedges is recognized in earnings in the period incurred and is reported as a component of Other expense, net. The changes in fair value on these contracts were immaterial to the Condensed Consolidated Financial Statements for the three and nine months ended March 30, 2018 and March 31, 2017.

The Company accounts for its interest rate swap as a designated cash flow hedge to mitigate variations in interest payments under a portion of its LIBOR-based term loans due to variations in the LIBOR index. The Company pays interest monthly at a fixed rate and receives interest monthly at the LIBOR rate on the notional amount of the contract. The effective portion of the change in fair value of this designated cash flow hedge is deferred in Other comprehensive income (loss), net of tax, with any ineffective portion recognized in Other income (expense), net.

Derivative Instruments

The fair value and balance sheet location of the Company’s derivative instruments were as follows:



	Derivative Assets
	Other current assets
	March 30, 2018		June 30, 2017
	(in millions)
Foreign exchange forward contracts, designated	$	9	$	6
Foreign exchange forward contracts, not designated	15		10
Interest rate swaps, designated	14		—
Total derivatives	$	38	$	16



	Derivative Liabilities
	Accrued expenses
	March 30, 2018		June 30, 2017
	(in millions)
Foreign exchange forward contracts, designated	$	1	$	2
Foreign exchange forward contracts, not designated	9		6
Interest rate swaps, designated	—		1
Total derivatives	$	10	$	9

Netting Arrangements

Under certain provisions and conditions within agreements with counterparties to the Company’s foreign exchange forward contracts, subject to applicable requirements, the Company has the right of offset associated with the Company’s foreign exchange forward contracts and is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. As of March 30, 2018 and June 30, 2017, the effect of rights of offset was not material and the Company did not offset or net the fair value amounts of derivative instruments in its Condensed Consolidated Balance Sheets.

Effect of Derivative Contracts on the Condensed Consolidated Statements of Operations

The impact of derivative contracts designated as hedging instruments on the Condensed Consolidated Financial Statements was as follows:



	Amount of Gain (Loss) Recognized in AOCI				Amount of Gain (Loss) Recognized in AOCI
	Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2017		March 30, 2018		March 31, 2017
	(in millions)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	$	23	$	50	$	30	$	(48	)
Interest rate swaps	7		—		15		—
Total	$	30	$	50	$	45	$	(48	)



	Amount of Gain (Loss) Reclassified from AOCI into Earnings				Amount of Gain (Loss) Reclassified from AOCI into Earnings
	Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2017		March 30, 2018		March 31, 2017
	(in millions)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	$	9	$	5	$	10	$	47
Total	$	9	$	5	$	10	$	47

The total net realized and unrealized transaction and foreign exchange forward contract currency gains and losses were not material to the Condensed Consolidated Financial Statements for the three and nine months ended March 30, 2018 and March 31, 2017.