Derivative Financial Instruments

3 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates.  We enter into certain derivative transactions to mitigate the volatility associated with these exposures. 

Cash Flow Hedges - Interest Rate Swap Contract

During the quarter, the Company entered into a new interest rate swap agreement to extend the duration of its existing swap arrangement and to take advantage of lower interest rates. The existing interest rate swap, which was in a loss position of $35.3 million, was terminated, and the hedging relationship was de-designated. The liability for the terminated interest rate swap is not measured at fair value. The current and long-term portion of the liability for the terminated swap are recorded in Accrued expenses, income taxes payable and other current liabilities and Other long-term liabilities, respectively, on the Consolidated Balance Sheet and will be paid over the remaining term of the new swap. The loss amount for the terminated swap is included in Accumulated other comprehensive loss and will be amortized on a straight-lined basis into interest expense through January 31, 2024, the remaining term of the original swap.

The new interest rate swap is a floating-to-fixed interest rate swap contract to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. The notional amount is scheduled to decrease quarterly and will expire on January 29, 2027. The new interest rate swap was designated as a cash flow hedge based on certain quantitative and qualitative assessments and we have determined that the hedge is highly effective and qualifies for hedge accounting.

Foreign Currency Contracts Not Designated as Hedges

We enter into forward foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting.

The notional amount of our derivative instruments are as follows:

	December 31, 2020		September 30, 2020
Derivatives designated as hedging instruments
Interest rate swap contract - new agreement	$	560,003	$	—
Interest rate swap contract - terminated agreement	—		571,000
Derivatives not designated as hedging instruments
Foreign exchange contracts to purchase U.S. dollars	$	5,418	$	8,054
Foreign exchange contracts to sell U.S. dollars	27,725		25,105

The fair value of our derivative instruments included in the Consolidated Balance Sheets was as follows:

		Derivative Assets				Derivative Liabilities
	Consolidated Balance Sheet Location	December 31, 2020		September 30, 2020		December 31, 2020		September 30, 2020
Derivatives designated as hedging instruments
Interest rate swap contract	Accrued expenses, income taxes payable and other current liabilities	$	—	$	—	$	2,869	$	11,992
	Other long-term liabilities	—		—		3,813		26,000
Derivatives not designated as hedging instruments
Foreign exchange contracts	Prepaid expenses and other current assets	$	289	$	27	$	—	$	—
	Accrued expenses, income taxes payable and other current liabilities	—		—		52		165

The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income:

		Gain (Loss) Recognized in Statement of Income
		Three Months Ended December 31,
	Consolidated Statement of Income Location	2020		2019
Derivatives designated as hedging instruments
Interest rate swap contract	Interest expense	$	(2,445)	$	(1,170)
Terminated interest rate swap contract	Interest expense	(929)		—
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other income (expense), net	$	122	$	6

The following table summarizes the effect of our derivative instruments on Accumulated other comprehensive income:

	Amount of Gain (Loss) Recognized in Other Comprehensive Income
	Three Months Ended December 31,
	2020		2019
Derivatives designated as hedging instruments
Interest rate swap contract	$	(6,449)	$	4,314

We expect approximately $14,013 to be reclassified from Accumulated other comprehensive income (loss) into Interest expense during the next twelve months related to our interest rate swap based on projected rates of the LIBOR forward curve as of December 31, 2020. This amount includes the amortization of the loss associated with the terminated swap arrangement.