Derivative Financial Instruments

The Company's primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk. As a result of the use of derivative financial instruments, the Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. The Company manages counterparty credit risk in derivative contracts by reviewing counterparty creditworthiness on a regular basis, establishing collateral requirement and limiting exposure to any single counterparty. The right of set-off that exists with certain transactions enables the Company to net amounts due to and from the counterparty, reducing the maximum loss from credit risk in the event of counterparty default.

The Company entered into interest rate swap contracts with certain independent financial institutions to manage interest rate risks related to fixed interest rate expenses from its 2024 Notes and floating interest rate income from its investments in marketable debt securities. See “Note 10. Debt and Credit Facility” for more discussion related to interest rate swap contracts. The interest rate swap contracts were designated and qualified as fair value hedges of the 2024 Notes, and were separately accounted for as a derivative. The interest rate swap contracts and the 2024 Notes were initially measured at fair value. Any subsequent changes in fair values of the interest rate swap contracts and the 2024 Notes will be recorded in the Company’s consolidated balance sheets. During the nine months ended March 31, 2018, the net change in fair values of the interest rate swap contracts and the underlying 2024 Notes was $29.0 million, which was recorded as a derivative liability for the interest rate swap contacts (as a component of other long-term liabilities on the consolidated balance sheets) and also a reduction from the carrying amount of 2024 Notes. There was no ineffectiveness during all periods presented. Other than this arrangement, there have been no material changes to the Company's derivative financial instruments since April 1, 2017.

As of March 31, 2018 and April 1, 2017, the Company had the following outstanding forward currency exchange contracts (in notional amount), which were derivative financial instruments:



(In thousands and U.S. dollars)	March 31, 2018		April 1, 2017
Singapore Dollar	$	24,914	$	22,012
Euro	38,987		18,553
Indian Rupee	62,472		31,121
British Pound	8,155		10,813
Japanese Yen	3,859		3,757
Chinese Yuan	8,260		—
	$	146,647	$	86,256

As part of the Company's strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a forward outlook of up to two years for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates through February 2020. The net unrealized gains, which approximate the fair market value of the outstanding forward currency exchange contracts, are expected to be recognized in the consolidated statements of income within the next two years.

As of March 31, 2018, all of the forward foreign currency exchange contracts were designated and qualified as cash flow hedges and the effective portion of the gain or loss on the forward contracts was reported as a component of other comprehensive income (loss) and reclassified into net income in the same period during which the hedged transaction affects earnings. The estimated amount of such gains or losses as of March 31, 2018 that is expected to be reclassified into earnings was not material. The ineffective portion of the gains or losses on the forward contracts was included in the net income for all periods presented.

The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as acquisitions and capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.

The Company had the following derivative instruments as of March 31, 2018 and April 1, 2017, located on the consolidated balance sheet, utilized for risk management purposes detailed above:



	Foreign Exchange Contracts
	Asset Derivatives			Liability Derivatives
(In thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
March 31, 2018	Prepaid expenses and other current assets	$	2,922	Other accrued liabilities	$	12
April 1, 2017	Prepaid expenses and other current assets	2,424		Other accrued liabilities	763

The Company does not offset or net the fair value amounts of derivative financial instruments in its consolidated balance sheets. The potential effect of rights of set-off associated with the derivative financial instruments was not material to the Company's consolidated balance sheet for all periods presented.

The following table summarizes the effect of derivative instruments on the consolidated statements of income for fiscal 2018 and 2017:



	Foreign Exchange Contracts
	Years End
(In thousands)	March 31, 2018			April 1, 2017
Amount of gains recognized in other comprehensive income on derivative (effective portion of cash flow hedging)	$	862		$	405
Amount of gain/(losses) reclassified from accumulated other comprehensive income into income (effective portion) *	4,655			(1,701		)
Amount of (losses)/gains recorded (ineffective portion) *	(14		)	31


*	Recorded in interest and other expense, net within the consolidated statements of income.