Derivative Financial Instruments

6 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

12. 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 first quarter of fiscal 2021, 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. At that time, the then 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 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 income 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 amounts of our derivative instruments are as follows:

	March 31, 2022		September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract - new agreement	$	552,015	$	555,210
Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars	$	4,250	$	4,225
Foreign exchange contracts to sell U.S. dollars	29,290		23,235

The fair values of our derivative instruments included in the Consolidated Balance Sheets are as follows:

		Derivative Assets				Derivative Liabilities
	Consolidated Balance Sheet Location	March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract	Prepaid expenses and other current assets	$	6,001	$	—	$	—	$	—
	Other long-term assets	36,902		12,335		—		—
	Accrued expenses and other current liabilities	—		—		—		2,995
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	124	$	—	$	—	$	—
	Accrued expenses and other current liabilities	—		—		489		388

The following table summarizes the effects of our derivative instruments on our Consolidated Statements of Income (Loss):

		Loss Recognized in Statement of Income (Loss)
	Consolidated Statement of Income (Loss) Location	Three Months Ended March 31,				Six Months Ended March 31,
		2022		2021		2022		2021
Derivatives designated as hedging instruments:
Interest rate swap contract	Interest expense, net	$	(792)	$	(809)	$	(1,583)	$	(3,254)
Terminated interest rate swap contract	Interest expense, net	(2,786)		(2,786)		(5,572)		(3,715)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (expense) income, net	$	(673)	$	(759)	$	(1,385)	$	(637)

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

	Gain Recognized in Other Comprehensive Income
	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Derivatives designated as hedging instruments:
Interest rate swap contract	$	26,508	$	19,361	$	31,979	$	12,912

We expect approximately $5,143 to be reclassified from Accumulated other comprehensive income into Interest expense, net during the next twelve months related to our interest rate swap based on projected rates of the LIBOR forward curve as of March 31, 2022. This amount includes the amortization of the loss associated with the terminated swap contract.