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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 12 Months Ended
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Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The authoritative guidance requires companies to recognize all derivative instruments and hedging activities, including foreign currency exchange contracts and interest rate lock agreements, (collectively “derivatives”) as either assets or liabilities at fair value on the Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency exchange contracts and interest rate lock agreements as cash flow hedges of certain forecasted foreign currency denominated sales, purchase and spending transactions, and the benchmark interest rate of the corresponding debt financing, respectively. Our foreign subsidiaries operate and sell our products in various global markets. As a result, we are exposed to risks relating to changes in foreign currency exchange rates. We utilize foreign currency forward exchange contracts and option contracts to hedge against future movements in foreign exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions, such as the Japanese yen, the euro, the pound sterling and the Israeli new shekel. We routinely hedge our exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. These currency forward exchange contracts and options, designated as cash flow hedges, generally have maturities of less than 18 months. Cash flow hedges are evaluated for effectiveness monthly, based on changes in total fair value of the derivatives. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material losses. In January 2020, we entered into a series of forward contracts (“2020 Rate Lock Agreements”) to lock the benchmark interest rate on a portion of the $750.0 million of 3.300% Senior Notes due in 2050 (the “2020 Senior Notes”). The 2020 Rate Lock Agreements had a notional amount of $350.0 million in aggregate which matured in the same quarter. The 2020 Rate Lock Agreements were terminated on the date of the pricing of the 2020 Senior Notes and we recorded the fair value of $21.5 million as a loss within accumulated other comprehensive income (loss) (“OCI”) as of March 31, 2020, which will be amortized over the life of the debt. We recognized $0.2 million for the year ended June 30, 2020, for the amortization of the loss recognized in accumulated other comprehensive income (loss), which increased the interest expense. As of June 30, 2020, the unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was $21.3 million. During the fiscal year ended June 30, 2018, we entered into a series of forward contracts (the “2018 Rate Lock Agreements”) to lock the benchmark interest rate prior to expected debt issuances. The objective of the 2018 Rate Lock Agreements was to hedge the risk associated with the variability in interest rates due to the changes in the benchmark rate leading up to the closing of the intended financing, on the notional amount being hedged. The 2018 Rate Lock Agreement had a notional amount of $500.0 million in aggregate, which matured and terminated in the third quarter of fiscal year ended June 30, 2019 and we recorded the fair value of $13.6 million as a loss within OCI. We recognized $1.2 million and $0.3 million for the fiscal years ended June 30, 2020 and 2019, respectively, for the amortization of the loss recognized in AOCI, which amounts increased our interest expense. As of June 30, 2020, the unamortized portion of the fair value of the 2018 Rate Lock Agreements was $12.1 million. In October 2014, we entered into a series of forward contracts (“Rate Lock Agreements”) to lock the benchmark rate on a portion of the 2014 Senior Notes. The Rate Lock Agreements had a notional amount of $1.00 billion in aggregate which matured in the second quarter of the fiscal year ended June 30, 2015. The Rate Lock Agreements were terminated on the date of pricing of the $1.25 billion of 4.650% Senior Notes due in 2024 and we recorded the fair value of $7.5 million as a gain within accumulated other comprehensive income (loss) (“OCI”) as of December 31, 2014. We recognized $0.8 million for each of the fiscal years ended June 30, 2020, 2019 and 2018, for the amortization of the gain recognized in accumulated other comprehensive income (loss), which amount reduced the interest expense. As of June 30, 2020, the unamortized portion of the fair value of the forward contracts for the rate lock agreements was $3.3 million. For derivatives that are designated and qualify as cash flow hedges, the effective portion of the gains or losses is reported in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Prior to adopting the new accounting guidance for hedge accounting, time value was excluded from the assessment of effectiveness for derivatives designated as cash flow hedges. Time value was amortized on a mark-to-market basis and recognized in earnings over the life of the derivative contract. For derivative contracts executed after adopting the new accounting guidance, the election to include time value for the assessment of effectiveness is made on all forward contracts designated as cash flow hedges. The change in fair value of the derivative is recorded in OCI until the hedged item is recognized in earnings. The assessment of effectiveness of options contracts designated as cash flow hedges continue to exclude time value after adopting the new accounting guidance. The initial value of the component excluded from the assessment of effectiveness is recognized in earnings over the life of the derivative contract. Any difference between change in the fair value of the excluded components and the amounts recognized in earnings are recorded in OCI. For derivatives that are not designated as cash flow hedges, gains and losses are recognized in other expense (income), net. We use foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivative instruments are largely offset by the changes in the fair value of the assets or liabilities being hedged. Derivatives in Cash Flow Hedging Relationships: Foreign Exchange and Interest Rate Contracts The gains (losses) on derivatives in cash flow hedging relationships recognized in OCI for the indicated periods were as follows:
| Year ended June 30, |  |
(In thousands) | 2020 |  | 2019
Derivatives Designated as Hedging Instruments: |  |  |
Rate lock agreements: |  |  |
Amounts included in the assessment of effectiveness | $ | — |  |  | $ | (8,649) |
Foreign exchange contracts: |  |  |
Amounts included in the assessment of effectiveness | $ | (16,649) |  |  | $ | (358) |
Amounts excluded from the assessment of effectiveness | $ | (90) |  |  | $ | (112) |
The locations and amounts of designated and non-designated derivative’s gains and losses reported in the Consolidated Statements of Operations for the indicated periods were as follows:
| Year ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |
| 2020 |  |  |  |  |  |  |  | 2019 |  |  |  |  |  |
(In thousands) | Revenues |  | Costs of Revenues and Operating Expense |  | Interest Expense |  | Other Expense (Income), Net |  | Revenues |  | Costs of Revenues |  | Interest Expense |  | Other Expense (Income), Net
Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded | $ | 5,806,424 |  |  | $ | 2,449,561 |  |  | $ | 160,274 |  |  | $ | 2,678 |  |  | $ | 4,568,904 |  |  | $ | 1,869,377 |  |  | $ | 124,604 |  |  | $ | (31,462) |
Gains (losses) on Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rate lock agreements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gains (losses) reclassified from accumulated OCI to earnings | $ | — |  |  | $ | — |  |  | $ | (637) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 424 |  |  | $ | — |
Amount of gains (losses) reclassified from accumulated OCI to earnings as a result that a forecasted transaction is no longer probable of occurring | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gains (losses) reclassified from accumulated OCI to earnings | $ | 4,473 |  |  | $ | (1,377) |  |  | $ | — |  |  | $ | — |  |  | $ | 4,329 |  |  | $ | (739) |  |  | $ | — |  |  | $ | — |
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach | $ | (387) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Amount excluded from the assessment of effectiveness | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (323) |
Gains (losses) on Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gains (losses) recognized in earnings | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,990 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (23) |
The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts, with maximum remaining maturities of approximately seven months as of June 30, 2020 and 2019, were as follows:
(In thousands) | As of June 30, 2020 |  | As of June 30, 2019
Cash flow hedge contracts- foreign currency |  |  |
Purchase | $ | 10,705 |  |  | $ | 31,108 |
Sell | $ | 71,431 |  |  | $ | 113,226 |
Other foreign currency hedge contracts |  |  |
Purchase | $ | 329,310 |  |  | $ | 257,614 |
Sell | $ | 357,939 |  |  | $ | 273,061 |
The locations and fair value of our derivatives reported in our Consolidated Balance Sheets as of the dates indicated below were as follows:
| Asset Derivatives |  |  |  |  |  | Liability Derivatives |  |  |  |
| Balance Sheet Location |  | As of June 30,2020 |  | As of June 30,2019 |  | Balance Sheet Location |  | As of June 30,2020 |  | As of June 30,2019
(In thousands) |  |  | Fair Value |  |  |  |  |  | Fair Value |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Rate lock contracts | Other current assets |  | $ | — |  |  | $ | — |  |  | Other current liabilities |  | $ | — |  |  | $ | — |
Foreign exchange contracts | Other current assets |  | 680 |  |  | 397 |  |  | Other current liabilities |  | 45 |  |  | 2,097 |
Total derivatives designated as hedging instruments |  |  | $ | 680 |  |  | $ | 397 |  |  |  |  | $ | 45 |  |  | $ | 2,097 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | Other current assets |  | $ | 1,397 |  |  | $ | 2,160 |  |  | Other current liabilities |  | $ | 1,365 |  |  | $ | 1,237 |
Total derivatives not designated as hedging instruments |  |  | $ | 1,397 |  |  | $ | 2,160 |  |  |  |  | $ | 1,365 |  |  | $ | 1,237 |
Total derivatives |  |  | $ | 2,077 |  |  | $ | 2,557 |  |  |  |  | $ | 1,410 |  |  | $ | 3,334 |
The changes in OCI, before taxes, related to derivatives for the indicated periods were as follows:
|  | Year ended June 30, |  |
(In thousands) |  | 2020 |  | 2019
Beginning balance |  | $ | (10,791) |  |  | $ | 2,346 |
Amount reclassified to earnings |  | (2,072) |  |  | (4,018) |
Net change in unrealized gains or losses |  | (16,739) |  |  | (9,119) |
Ending balance |  | $ | (29,602) |  |  | $ | (10,791) |
Offsetting of Derivative Assets and Liabilities We present derivatives at gross fair values in the Consolidated Balance Sheets. We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows (in thousands):
As of June 30, 2020 |  |  |  |  |  |  |  | Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets |  |  |  |
Description |  | Gross Amounts of Derivatives |  | Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets |  | Net Amount of Derivatives Presented in the Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Derivatives - assets |  | $ | 2,077 |  |  | $ | — |  |  | $ | 2,077 |  |  | $ | (1,020) |  |  | $ | — |  |  | $ | 1,057 |
Derivatives - liabilities |  | $ | (1,410) |  |  | $ | — |  |  | $ | (1,410) |  |  | $ | 1,020 |  |  | $ | — |  |  | $ | (390) |
As of June 30, 2019 |  |  |  |  |  |  |  | Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets |  |  |  |
Description |  | Gross Amounts of Derivatives |  | Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets |  | Net Amount of Derivatives Presented in the Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Derivatives - assets |  | $ | 2,557 |  |  | $ | — |  |  | $ | 2,557 |  |  | $ | (1,397) |  |  | $ | — |  |  | $ | 1,160 |
Derivatives - liabilities |  | $ | (3,334) |  |  | $ | — |  |  | $ | (3,334) |  |  | $ | 1,397 |  |  | $ | — |  |  | $ | (1,937) |

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- 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
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