XML 35 R23.htm IDEA: XBRL DOCUMENT
v3.20.2

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended
--- | ---
Sep. 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 Condensed 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 (the “2020 Rate Lock Agreements”) with a notional amount of $350.0 million in aggregate to lock the benchmark interest rate on a portion of the 2020 Senior Notes. 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 is being amortized over the life of the debt. We entered into similar forward contracts in prior years to lock the benchmark interest rates prior to expected debt issuances, for which the original fair values of $13.6 million loss in fiscal 2019 and $7.5 million gain in fiscal 2015 were recognized in OCI, and are being amortized to interest expense over the lives of the associated debt. We recognized a net expense of $0.3 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, for the amortization of the net of the three rate lock agreements that had been recognized in accumulated OCI, which increased the interest expense on a net basis. As of September 30, 2020, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was $29.8 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:
| Three Months Ended |  |  |  |
| September 30, |  |
(In thousands) | 2020 |  | 2019 |  |  |  |
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Amounts included in the assessment of effectiveness | $ | (872) |  |  | $ | (740) |  |  |  |  |
Amounts excluded from the assessment of effectiveness | $ | (46) |  |  | $ | (2) |  |  |  |  |
The locations and amounts of designated and non-designated derivative’s gains and losses reported in the Condensed Consolidated Statements of Operations for the indicated periods were as follows:
| Three Months Ended September 30, |  | Three Months Ended September 30,
| 2020 |  | 2019
(In thousands) | Revenue |  | Cost of Revenues and Operating Expenses |  | Interest Expense |  | Other Expense (Income), Net |  | Revenue |  | Cost of Revenues and Operating Expenses |  | Interest Expense |  | Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded | $ | 1,538,620 |  |  | $ | 1,012,231 |  |  | $ | 39,386 |  |  | $ | 3,197 |  |  | $ | 1,413,414 |  |  | $ | 1,003,166 |  |  | $ | 40,350 |  |  | $ | (1,618) |
Gains (losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gains (losses) reclassified from accumulated OCI to earnings | $ | — |  |  | $ | — |  |  | $ | (279) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (99) |  |  | $ | — |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gains (losses) reclassified from accumulated OCI to earnings | $ | (90) |  |  | $ | 550 |  |  | $ | — |  |  | $ | — |  |  | $ | 475 |  |  | $ | (1,801) |  |  | $ | — |  |  | $ | — |
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach | $ | (127) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (102) |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Gains (losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (5,598) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,325 |
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 the dates indicated below were as follows:
| As of |  | As of
(In thousands) | September 30, 2020 |  | June 30, 2020
Cash flow hedge contracts - foreign currency |  |  |
Purchase | $ | 10,393 |  |  | $ | 10,705 |
Sell | $ | 72,007 |  |  | $ | 71,431 |
Other foreign currency hedge contracts |  |  |
Purchase | $ | 310,356 |  |  | $ | 329,310 |
Sell | $ | 331,908 |  |  | $ | 357,939 |
The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet |  | As of |  | As of |  | Balance Sheet |  | As of |  | As of
| Location |  | September 30, 2020 |  | June 30, 2020 |  | Location |  | September 30, 2020 |  | June 30, 2020
(In thousands) |  | Fair Value |  |  | Fair Value
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | Other current assets |  | $ | 314 |  |  | $ | 680 |  |  | Other current liabilities |  | $ | 427 |  |  | $ | 45 |
Total derivatives designated as hedging instruments |  |  | 314 |  |  | 680 |  |  |  |  | 427 |  |  | 45 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | Other current assets |  | 2,884 |  |  | 1,397 |  |  | Other current liabilities |  | 2,459 |  |  | 1,365 |
Total derivatives not designated as hedging instruments |  |  | 2,884 |  |  | 1,397 |  |  |  |  | 2,459 |  |  | 1,365 |
Total derivatives |  |  | $ | 3,198 |  |  | $ | 2,077 |  |  |  |  | $ | 2,886 |  |  | $ | 1,410 |
The changes in OCI, before taxes, related to derivatives for the indicated periods were as follows:
| Three Months Ended |  |  |  |
| September 30, |  |
(In thousands) | 2020 |  | 2019 |  |  |  |
Beginning balance | $ | (29,602) |  |  | $ | (10,791) |  |  |  |  |
Amount reclassified to earnings | (54) |  |  | 1,527 |  |  |  |  |
Net change in unrealized gains or losses | (918) |  |  | (742) |  |  |  |  |
Ending balance | $ | (30,574) |  |  | $ | (10,006) |  |  |  |  |
Offsetting of Derivative Assets and Liabilities We present derivatives at gross fair values in the Condensed 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 September 30, 2020 |  |  |  |  |  | Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets |  |
Description |  | Gross Amounts of Derivatives |  | Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets |  | Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Derivatives - Assets |  | $ | 3,198 |  |  | $ | — |  |  | $ | 3,198 |  |  | $ | (2,081) |  |  | $ | — |  |  | $ | 1,117 |
Derivatives - Liabilities |  | $ | (2,886) |  |  | $ | — |  |  | $ | (2,886) |  |  | $ | 2,081 |  |  | $ | — |  |  | $ | (805) |
As of June 30, 2020 |  |  |  |  |  | Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets |  |
Description |  | Gross Amounts of Derivatives |  | Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets |  | Net Amount of Derivatives Presented in the Condensed 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) |

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