Derivative Financial Instruments

3 Months Ended

Jun. 27, 2015

Derivative Financial Instruments

9. Derivative Financial Instruments

The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for certain of its transactions. The Company in its normal course of business enters into transactions with foreign suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using foreign currency forward exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company’s derivative financial instruments are not currently subject to master netting arrangements. The Company does not enter into derivative contracts for trading or speculative purposes.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the consolidated balance sheets as of June 27, 2015 and March 28, 2015 (in thousands):

					Fair Values
	Notional Amounts				Current Assets (1)				Current Liabilities (2)
	June 27, 2015		March 28, 2015		June 27, 2015		March 28, 2015		June 27, 2015		March 28, 2015
Designated forward currency exchange contracts	$	295,785	$	226,090	$	8,546	$	23,590	$	137	$	522
Undesignated forward currency exchange contracts		12,264		25,788		382		1,414		20		78
Total	$	308,049	$	251,878	$	8,928	$	25,004	$	157	$	600

⁽¹⁾  Recorded within prepaid expenses and other current assets in the Company’s audited consolidated balance sheets.

⁽²⁾  Recorded within accrued expenses and other current liabilities in the Company’s audited consolidated balance sheets.

Changes in the fair value of the effective portion of the Company’s forward foreign currency exchange contracts that are designated as accounting hedges are recorded in equity as a component of accumulated other comprehensive income, and are reclassified from accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of operations. The following table summarizes the impact of the effective portion of gains and losses of the forward contracts designated as hedges for the three-month periods ended June 27, 2015 and June 28, 2014 (in thousands):

	Three Months Ended
	June 27, 2015						June 28, 2014
	Pre-Tax Loss Recognized in OCI (Effective Portion)			Pre-Tax Loss Reclassified from Accumulated OCI into Earnings (Effective Portion)			Pre-Tax Gain Recognized in OCI (Effective Portion)		Pre-Tax Loss Reclassified from Accumulated OCI into Earnings (Effective Portion)
Forward currency exchange contracts		(11,706	)		(48	)	$	539	$	(1,134	)

Amounts related to ineffectiveness were not material during all periods presented. The Company expects that substantially all of the amounts currently recorded in accumulated other comprehensive loss will be reclassified into earnings during the next twelve months, based upon the timing of inventory purchases and turns. These amounts are subject to fluctuations in the applicable currency exchange rates.

During the three-month periods ended June 27, 2015 and June 28, 2014, the Company recognized $1.0 million and $0.8 million, respectively, in losses related to the change in the fair value of undesignated forward currency exchange contracts within foreign currency gains (losses) in the Company’s consolidated statement of operations.