XML 24 R12.htm IDEA: XBRL DOCUMENT v3.4.0.3
Risk Management
 3 Months Ended
Apr. 02, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Risk Management
Risk Management
Foreign Currency Risk
As of April 2, 2016, the Company had outstanding foreign exchange contracts with notional amounts totaling $708 million, compared to $494 million outstanding at December 31, 2015. The Company does not believe these financial instruments should subject it to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions.
The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of April 2, 2016, and the corresponding positions as of December 31, 2015: 
 
Notional Amount
Net Buy (Sell) by Currency
April 2,
2016
 
December 31,
2015
Euro
$
233

 
$
99

British Pound
150

 
62

Chinese Renminbi
(95
)
 
(114
)
Australian Dollar
(51
)
 
(60
)
Brazilian Real
(49
)
 
(44
)

Interest Rate Risk
One of the Company’s European subsidiaries has Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Company has interest rate swap agreements in place which change the characteristics of interest rate payments from variable to maximum fixed-rate payments. The interest rate swaps are not designated as a hedge. As such, the changes in the fair value of the interest rate swaps are included in Other income (expense) in the Company’s condensed consolidated statements of operations. The fair value of the interest rate swap was in a liability position of $1 million at both April 2, 2016 and December 31, 2015.

Counterparty Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of April 2, 2016, all of the counterparties have investment grade credit ratings. As of April 2, 2016, the Company had $3 million of exposure to aggregate net credit risk with all counterparties.
The following tables summarize the fair values and locations in the condensed consolidated balance sheets of all derivative financial instruments held by the Company as of April 2, 2016 and December 31, 2015:
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
April 2, 2016
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
3

 
Other current assets
 
$
5

 
Accrued liabilities
Interest rate swap
—

 
Other current assets
 
1

 
Accrued liabilities
Total derivatives
$
3

 
 
 
$
6

 
 
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2015
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
6

 
Other current assets
 
2

 
Accrued liabilities
Interest rate swap
—

 
Other current assets
 
1

 
Accrued liabilities
Total derivatives
6

 
 
 
3

 
 

The following table summarizes the effect of derivatives not designated as hedging instruments on the Company's condensed consolidated statements of operations for the three months ended April 2, 2016 and April 4, 2015:
 
Three Months Ended
 
Statements of
Operations Location
Loss on Derivative Instruments
April 2,
2016
 
April 4,
2015
 
Interest rate swap
$
—

 
$
(1
)
 
Other income (expense)
Foreign exchange contracts
(12
)
 
(16
)
 
Other income (expense)
Total derivatives
$
(12
)
 
$
(17
)
 
 
The Company had no instruments designated as hedging instruments for the three months ended April 2, 2016 and April 4, 2015.