Derivative Financial Instruments

12 Months Ended

Mar. 28, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 first quarter of fiscal 2020, the Company sold the interest rate swap contracts for an immaterial gain. The gain has been amortized as a reduction to interest expense over the remaining life of the 2024 Notes. As a result of the sale, the Company recorded the net change in fair value of the interest rate swap contracts of $11.7 million in the Company's consolidated balance sheets. See “Note 12. Debt and Credit Facility” for more discussion related to interest rate swap contracts. There was no ineffectiveness during all periods presented.

During the fourth quarter of fiscal 2020, the Company entered into interest rate swap contracts with an independent financial institution to reduce the risk of changes in benchmark interest rate from future debt issuance. The interest rate swap contracts were designated and qualified as cash flow hedges. The interest rate swap contracts were initially measured at fair value and subsequent changes in fair values recorded in other comprehensive income (loss). As a result, the aggregate fair values of the outstanding interest rate swap contracts as of March 28, 2020 was $3.3 million and recorded in other long-term liabilities. An unrealized loss, net of tax, of $2.6 million was deferred in accumulated other comprehensive income (loss) at March 28, 2020. The interest rate swap contracts will be reclassified into net income in the same period during which the hedged transaction affects earnings. There was no ineffectiveness during the period presented.

As of March 28, 2020 and March 30, 2019, 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 28, 2020		March 30, 2019
Singapore Dollar	$	28,875	$	29,420
Euro	33,474		39,408
Indian Rupee	76,076		77,973
British Pound	20,191		10,575
Japanese Yen	2,433		3,840
Chinese Yuan	26,266		34,386
	$	187,315	$	195,602

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 2022. The net unrealized losses, 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 28, 2020, 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 28, 2020 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 28, 2020 and March 30, 2019, 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 28, 2020	Prepaid expenses and other current assets	$	30	Other accrued liabilities	$	9,140
March 30, 2019	Prepaid expenses and other current assets	2,802		Other accrued liabilities	1,722

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 2020 and 2019:



	Foreign Exchange Contracts
	Years Ended
(In thousands)	March 28, 2020			March 30, 2019
Amount of (losses)/gains recognized in other comprehensive income on derivative (effective portion of cash flow hedging)	$	(7,637	)	$	(1,427	)
Amount of (losses)/gains reclassified from accumulated other comprehensive income into income (effective portion) *	(2,923		)	(5,603		)
Amount of losses recorded (ineffective portion) *	(8		)	(4		)

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