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Derivative Instruments and Hedging Activities
 6 Months Ended
Mar. 28, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 
Our currency exchange contracts are designated as cash flow hedges and qualify as hedging instruments. We also have derivatives that are not designated as cash flow hedges and, therefore, are accounted for and reported under foreign currency guidance. Regardless of designation for accounting purposes, we believe all of our derivative instruments are hedges of transactional risk exposures. The fair value of our outstanding designated and undesignated derivative assets and liabilities are reported in the Consolidated Balance Sheets as follows: 
 
 
March 28, 2020
 
 
Prepaid Expenses
and Other
Current Assets
 
Other Accrued
Liabilities
Designated hedge derivatives
 
 

 
 

Cash flow derivatives
 
$
542

 
$
46

Cross currency swap
 
943

 
—

Total designated hedge derivatives
 
1,485

 
46

Undesignated hedge derivatives
 
 

 
 

Balance sheet derivatives
 
328

 
—

Total hedge derivatives
 
$
1,813

 
$
46

 
 
September 28, 2019
 
 
Prepaid Expenses
and Other
Current Assets
 
Other Accrued
Liabilities
Designated hedge derivatives
 
 

 
 

Cash flow derivatives
 
$
907

 
$
133

Total designated hedge derivatives
 
907

 
133

Undesignated hedge derivatives
 
 

 
 

Balance sheet derivatives
 
—

 
118

Total hedge derivatives
 
$
907

 
$
251

  
A reconciliation of the net fair value of designated hedge derivatives subject to master netting arrangements that are recorded in the Consolidated Balance Sheets to the net fair value that could have been reported in the Consolidated Balance Sheets is as follows: 
 
 
Gross
Recognized
Amount
 
Gross
Offset
Amount
 
Net
Amount
Presented
 
Derivatives
Subject to
Offset
 
Cash
Collateral
Received
 
Net
Amount
March 28, 2020
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
$
1,485

 
$
—

 
$
1,485

 
$
(46
)
 
$
—

 
$
1,439

Liabilities
 
46

 
—

 
46

 
(46
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
September 28, 2019
 
 

 
 

 
 

 
 

 
 

 
 

Assets
 
$
907

 
$
—

 
$
907

 
$
(133
)
 
$
—

 
$
774

Liabilities
 
133

 
—

 
133

 
(133
)
 
—

 
—

 
Cash Flow Hedging – Currency Risks
Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Gains and losses related to changes in the market value of these contracts are reported as a component of accumulated other comprehensive income (AOCI) within shareholders' equity in the Consolidated Balance Sheets and reclassified to earnings in the same line item in the Consolidated Statements of Income and in the same period as the recognition of the underlying hedged transaction. We periodically assess whether our currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, we discontinue hedge accounting prospectively. 
As of March 28, 2020 and September 28, 2019, we had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $29,323 and $43,033, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding was $28,179 and $38,177 as of March 28, 2020 and September 28, 2019, respectively. As of March 28, 2020, the net market value of the foreign currency exchange contracts was a net asset of $496, consisting of $542 in assets and $46 in liabilities. As of September 28, 2019, the net market value of the foreign currency exchange contracts was a net asset of $774, consisting of $907 in assets and $133 in liabilities.
The pretax amounts recognized in AOCI on currency exchange contracts, including (gains) losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (loss) (OCI), are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
March 28,
2020
 
March 30,
2019
 
March 28,
2020
 
March 30,
2019
Beginning unrealized net gain (loss) in AOCI
 
$
397

 
$
214

 
$
566

 
$
672

Net (gain) loss reclassified into revenue
 
(316
)
 
(16
)
 
(335
)
 
(601
)
Net gain (loss) recognized in OCI
 
267

 
(6
)
 
117

 
121

Ending unrealized net gain (loss) in AOCI
 
$
348

 
$
192

 
$
348

 
$
192


As of March 28, 2020, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $307. The maximum remaining maturity of any forward or optional contract as of March 28, 2020 was 1.0 year.
Interest Rate Swap
On October 20, 2016, we entered into a floating to fixed interest rate swap agreement to mitigate our exposure to interest rate increases related to a portion of our tranche B term loan facility. In connection with the repayment of a portion of the tranche B term loan facility during the fourth quarter of fiscal year 2019, we terminated the interest rate swap agreement. Prior to termination, every month we paid fixed interest at 1.256% in exchange for interest received at one month U.S. LIBOR. The interest rate swap was designated as a cash flow hedge. As a result, changes in the fair value of the interest rate swap were recorded in AOCI within shareholders' equity in the Consolidated Balance Sheets. The unrealized gains on the interest rate swap associated with the interest payments on our tranche B term loan facility that are still forecasted to occur are included in AOCI. These gains will be reclassified into interest expense over the life of the original swap agreement as the hedged interest payments occur.
The pretax amounts recognized in AOCI on the interest rate swap, including (gains) losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in OCI, are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
March 28,
2020
 
March 30,
2019
 
March 28,
2020
 
March 30,
2019
Beginning unrealized net gain (loss) in AOCI
 
$
778

 
$
4,889

 
$
1,079

 
$
7,411

Net (gain) loss reclassified into interest expense
 
(236
)
 
(709
)
 
(537
)
 
(1,293
)
Net gain (loss) recognized in OCI
 
—

 
(496
)
 
—

 
(2,434
)
Ending unrealized net gain (loss) in AOCI
 
$
542

 
$
3,684

 
$
542

 
$
3,684


As of March 28, 2020, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $542.
Foreign Currency Balance Sheet Derivatives
We also use foreign currency derivative contracts to maintain the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these derivative contracts are included in other income (expense), net in the Consolidated Statements of Income. 
As of March 28, 2020 and September 28, 2019, we had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $73,681 and $60,827, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding as of March 28, 2020 and September 28, 2019 was $14,027 and $118, respectively. As of March 28, 2020 and September 28, 2019, the net market value of the foreign exchange balance sheet derivative contracts was a net asset of $328 and a net liability of $118, respectively.
The net gain (loss) recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts is as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
March 28,
2020
 
March 30,
2019
 
March 28,
2020
 
March 30,
2019
Net gain (loss) recognized in other income (expense), net
 
$
140

 
$
(395
)
 
$
(406
)
 
$
(388
)

Net Investment Hedge
We have net investments in foreign subsidiaries that are subject to changes in foreign currency exchange rates. In the second quarter of fiscal year 2020, we entered into a cross-currency swap with a gross notional U.S. dollar equivalent amount of $100,485 as a net investment hedge for a portion of our net investments in our Euro denominated subsidiaries. Gains and losses resulting from a change in fair value of the net investment hedge are offset by gains and losses on the underlying foreign currency exposure and included in AOCI in our Consolidated Balance Sheets. As of March 28, 2020, the deferred foreign currency activity associated with the net investment hedge was not considered material.