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Derivatives and Hedging | 9 Months Ended
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Apr. 30, 2019
Investments, All Other Investments [Abstract] |
Derivatives and Hedging |
5. | Derivatives and Hedging
The Company uses interest rate swap agreements, foreign currency forward contracts and certain non-derivative financial instruments to manage its risks associated with foreign currency exchange rates and interest rates. The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. The Company records derivatives as assets and liabilities on the balance sheet at fair value. Changes in the fair value of derivative instruments are recognized in earnings unless the derivative qualifies and is designated as a hedge. Cash flows from derivatives are classified in the Condensed Consolidated Statements of Cash Flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to net settle contracts with the same counter parties. These arrangements generally do not call for collateral and as of the applicable dates presented below, no cash collateral had been received or pledged related to the underlying derivatives. The fair value of our derivative instruments and the associated notional amounts, presented gross, were as follows (The Company did not have any designated hedge instruments prior to February 1, 2019):
|  | April 30, 2019 |
Cash Flow Hedges |  | Notional |  |  | Fair Value of Assets |  |  | Fair Value in Other Current Liabilities |
Foreign currency forward contracts |  | $ | 32,517 |  |  | $ | — |  |  | $ | 820 |
Interest rate swap agreements |  |  | 900,000 |  |  |  | — |  |  |  | 4,873 |
Total derivative financial instruments |  | $ | 932,517 |  |  | $ | — |  |  | $ | 5,693 |
Cash Flow Hedges The Company utilizes foreign currency forward contracts to hedge the effect of certain foreign currency exchange rate fluctuations on forecasted foreign currency transactions, including foreign currency denominated sales. These forward contracts are designated as cash flow hedges. The changes in fair value of these contracts are recorded in accumulated other comprehensive income (“AOCI”) until the hedged items affect earnings, at which time the gain or loss is reclassified into the same line item in the determination of net income as the underlying exposure being hedged. Cash flow hedged forward contracts impacting AOCI are forecasted to occur within the next 4 months. The Company has entered into interest rate swap agreements to manage certain of its interest rate exposures. During the three months ended April 30, 2019, the Company entered into pay-fixed, receive-floating interest rate swap agreements, totaling $900,000, in order to hedge against interest rate risk relating to the Company’s floating rate debt agreements. The interest rate swaps are designated as cash flow hedges of the expected interest payments related to the Company’s LIBOR-based floating rate debt. Amounts recorded in AOCI are recognized as interest expense over the remaining life of the debt as the forecasted interest transactions occur. Net Investment Hedges The Company designates a portion of its outstanding Euro-denominated term loan tranche as a hedge of foreign currency exposures related to investments the Company has in certain Euro-denominated functional currency subsidiaries. The foreign currency transaction gains and losses on the Euro-denominated portion of the term loan, which is designated and effective as a hedge of the Company’s net investment, are included as a component of the foreign currency translation adjustment. Gains included in the foreign currency translation adjustment for both the three and nine-month periods ended April 30, 2019 were $7,379. There were no amounts reclassified out of AOCI during the three and nine-month periods ended April 30, 2019. Derivatives Not Designated as Hedging Instruments As described in more detail in Note 2 to the Condensed Consolidated Financial Statements, on September 18, 2018, the Company entered into a definitive agreement to acquire EHG, which was later amended as of the February 1, 2019 closing date. The cash portion of the purchase price was denominated in Euro, and therefore the Company’s cash flows were exposed to changes in the Euro/USD exchange rate between the September 18, 2018 agreement date and the closing date. To reduce its exposure, the Company entered into a deal-contingent, foreign currency forward contract on the September 18, 2018 agreement date in the amount of 1.625 billion Euro. Hedge accounting was not applied to this instrument, and therefore all changes in fair value were recorded in earnings. The fair value of the foreign currency forward contract, using Level 2 inputs, was based on information obtained from third-party sources and include the spot rate and market-forward points. This liability was settled in connection with the close of the EHG acquisition on February 1, 2019 in the amount of $70,777. The Company recognized income related to this contract of $2,930 during the three months ended April 30, 2019 and expense of $70,777 during the nine months ended April 30, 2019, which are included in Acquisition-related costs in the Condensed Consolidated Statements of Income and Comprehensive Income. The total amounts presented in the Consolidated Statements of Income and Comprehensive Income due to changes in the fair value of the following derivative instruments are as follows:
|  | Three Months Ended April 30, 2019 |  |  | Nine Months Ended April 30, 2019 |
Gain (Loss) on Derivatives |  |  |  |  |  |  |  |
Designated as Cash Flow Hedges |  |  |  |  |  |  |  |
Gain (Loss) recognized in Other Comprehensive Income, net of tax |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (263 | ) |  | $ | (263 | )
Interest rate swap agreements |  |  | (3,764 | ) |  |  | (3,764 | )
Total gain (loss) |  | $ | (4,027 | ) |  | $ | (4,027 | )
|  | Three Months Ended |  |  | Nine Months Ended |
|  | April 30, 2019 |  |  | April 30, 2019 |
|  |  |  |  | Acquisition- |  |  | Interest |  |  |  |  |  | Acquisition- |  |  | Interest |
|  | Sales |  |  | Related Costs |  |  | Expense |  |  | Sales |  |  | Related Costs |  |  | Expense |
Gain (Loss) Reclassified from AOCI, Net of Tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (191 | ) |  | $ | — |  |  | $ | — |  |  | $ | (191 | ) |  | $ | — |  |  | $ | — |
Interest rate swap agreements |  |  | — |  |  |  | — |  |  |  | (55 | ) |  |  | — |  |  |  | — |  |  |  | (55 | )
Gain (Loss) on Derivatives Not |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) recognized in income, net of tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  | (160 | ) |  |  | 2,930 |  |  |  | — |  |  |  | (160 | ) |  |  | (70,777 | ) |  |  | — |
Interest rate swap agreements |  |  | — |  |  |  | — |  |  |  | 132 |  |  |  | — |  |  |  | — |  |  |  | 132 |
Total gain (loss) |  | $ | (351 | ) |  | $ | 2,930 |  |  | $ | 77 |  |  | $ | (351 | ) |  | $ | (70,777 | ) |  | $ | 77 |
There were no derivative or non-derivative instruments used in hedging strategies during the three and nine-month periods ended April 30, 2018.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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- References No definition available. + Details
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