XML 27 R13.htm IDEA: XBRL DOCUMENT
v3.19.2

Derivatives and Hedging Activities | 6 Months Ended
--- | ---
May 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES Hedge Accounting and Hedging Programs We recognize derivative instruments and hedging activities as either assets or liabilities in our condensed consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively, and record any ineffective portion of the hedging instruments in interest and other income (expense), net on our condensed consolidated statements of income. The net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense), net in our condensed consolidated statements of income. The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance which are largely mitigated with collateral security agreements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. In addition, we enter into master netting arrangements which have the ability to further limit credit-related losses with the same counterparty by permitting net settlement of transactions. Balance Sheet Hedging—Hedges of Foreign Currency Assets and Liabilities We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our condensed consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. Cash Flow Hedging—Hedges of Forecasted Foreign Currency Revenue In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months. We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to interest and other income (expense), net in our condensed consolidated statements of income at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in interest and other income (expense), net in our condensed consolidated statements of income. Fair Value Hedging - Hedges of Interest Rate Risk In fiscal 2014, we entered into interest rate swaps designated as fair value hedges related to our $900 million 4.75% fixed interest rate senior notes due February 1, 2020 (“2020 Notes”). In effect, the interest rate swaps convert the fixed interest rate on the 2020 Notes to a floating interest rate based on the London Interbank Offered Rate (“LIBOR”). Under the terms of the swaps, we will pay monthly interest at the one-month LIBOR rate plus a fixed number of basis points on the $900 million notional amount through February 1, 2020. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 14 for further details regarding our debt. The interest rate swaps are accounted for as fair value hedges and substantially offset the changes in fair value of the hedged portion of the underlying debt that are attributable to the changes in market risk. Therefore, the gains and losses related to changes in the fair value of the interest rate swaps are included in interest and other income (expense), net in our condensed consolidated statements of income. As of March 1, 2019, the fair value of the interest rate swaps was added to the carrying value of current debt in our condensed consolidated balance sheets. The fair value of derivative instruments on our condensed consolidated balance sheets as of May 31, 2019 and November 30, 2018 were as follows (in thousands):
| 2019 |  | 2018
| Fair Value Asset Derivatives |  | Fair Value Liability Derivatives |  | Fair Value Asset Derivatives |  | Fair Value Liability Derivatives
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange option contracts(1) (2) | $ | 27,254 |  |  | $ | — |  |  | $ | 40,191 |  |  | $ | — |
Interest rate swap (3) | — |  |  | 2,964 |  |  | — |  |  | 9,744 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange forward contracts (1) | 2,987 |  |  | 2,149 |  |  | 4,068 |  |  | 816 |
Total derivatives | $ | 30,241 |  |  | $ | 5,113 |  |  | $ | 44,259 |  |  | $ | 10,560 |
_________________________________________
(1) | Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets.
(2) | Hedging effectiveness expected to be recognized into income within the next twelve months.
(3) | Included in other liabilities on our condensed consolidated balance sheets.
The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three months ended May 31, 2019 and June 1, 2018 was as follows (in thousands):
| 2019 |  | 2018
| Foreign Exchange Option Contracts |  | Foreign Exchange Forward Contracts |  | Foreign Exchange Option Contracts |  | Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |
Net gain (loss) recognized in OCI, net of tax(1) | $ | 16,765 |  |  | $ | — |  |  | $ | 31,104 |  |  | $ | — |
Net gain (loss) reclassified from accumulated OCI into income, net of tax(2) | $ | 8,990 |  |  | $ | — |  |  | $ | 337 |  |  | $ | — |
Net gain (loss) recognized in income(3) | $ | (12,127 | ) |  | $ | — |  |  | $ | (12,084 | ) |  | $ | — |
Derivatives not designated as hedging relationships: |  |  |  |  |  |  |
Net gain (loss) recognized in income(4) | $ | — |  |  | $ | 2,887 |  |  | $ | — |  |  | $ | 2,784 |
The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the six months ended May 31, 2019 and June 1, 2018 was as follows (in thousands):
| 2019 |  | 2018
| Foreign Exchange Option Contracts |  | Foreign Exchange Forward Contracts |  | Foreign Exchange Option Contracts |  | Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |
Net gain (loss) recognized in OCI, net of tax(1) | $ | 8,308 |  |  | $ | — |  |  | $ | 29,767 |  |  | $ | — |
Net gain (loss) reclassified from accumulated OCI into income, net of tax(2) | $ | 17,491 |  |  | $ | — |  |  | $ | 1,359 |  |  | $ | — |
Net gain (loss) recognized in income(3) | $ | (24,269 | ) |  | $ | — |  |  | $ | (22,410 | ) |  | $ | — |
Derivatives not designated as hedging relationships: |  |  |  |  |  |  |
Net gain (loss) recognized in income(4) | $ | — |  |  | $ | 1,368 |  |  | $ | — |  |  | $ | (877 | )
_________________________________________
(1) | Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).
(2) | Effective portion classified as revenue.
(3) | Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.
(4) | Classified in interest and other income (expense), net.
Subsequent Event Subsequent to May 31, 2019, in anticipation of refinancing our $2.25 billion Term Loan due April 30, 2020 and $900 million 2020 Notes due February 1, 2020, we entered into interest rate lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance. These derivative instruments hedge the impact of changes in the benchmark interest rate to future interest payments and will be terminated upon debt issuance. We will account for these instruments as cash flow hedges in the third quarter of fiscal 2019.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration