Derivative Instruments and Hedging Activities

3 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

In the normal course of business, we are exposed to global market risks, including the effect of changes in foreign currency exchange rates. We use derivative instruments to manage our exposure to such risks and formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking hedge transactions. We recognize all derivatives in our Condensed Consolidated Balance Sheet (Unaudited) at fair value. We do not hold or issue derivatives for speculative purposes.

At September 30, 2016, we had open foreign currency forward contracts with an aggregate notional amount of $96 million, of which $40 million were classified as fair value hedges and $56 million were classified as cash flow hedges. This compares with open foreign currency forward contracts with an aggregate notional amount of $53 million at July 1, 2016, all of which were classified as fair value hedges. At September 30, 2016, contract expiration dates ranged from 3 days to approximately 21 months with a weighted average contract life of 6 months.

Fair Value Hedges

As of September 30, 2016, we had outstanding foreign currency forward contracts denominated in the British Pound,Australian Dollar, Canadian Dollar, Singapore Dollar, Norwegian Krone, Mexican Peso and Brazilian Real to hedge certain balance sheet items. The net gains or losses on foreign currency forward contracts designated as fair value hedges were not material in the quarters ended September 30, 2016 or October 2, 2015. In addition, no amounts were recognized in earnings in the quarters ended September 30, 2016 or October 2, 2015 related to hedged firm commitments that no longer qualify as fair value hedges.

Cash Flow Hedges

We also have hedged U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. As of September 30, 2016, we had outstanding foreign currency forward contracts denominated in the Euro, British Pound and Australian Dollar to hedge certain forecasted transactions. The net gains or losses from cash flow hedges recognized in earnings or recorded in other comprehensive income, including gains or losses related to hedge ineffectiveness, were not material in the quarters ended September 30, 2016 or October 2, 2015.