Derivatives and Hedging Activities

9 Months Ended

Apr. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company utilizes forward foreign exchange currency contracts to reduce the exchange rate risk of specific foreign currency denominated transactions. These contracts typically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future date, with maturities of less than 18 months, which qualify as cash flow hedges or net investment hedges under the accounting guidance for derivative instruments and hedging activities. The primary objective of the Company’s foreign currency exchange risk management program is to minimize the impact of currency movements due to transactions in other than the respective subsidiaries’ functional currency and to minimize the impact of currency movements on the Company’s net investment denominated in a currency other than the U.S. dollar. To achieve this objective, the Company hedges a portion of known exposures using forward foreign exchange currency contracts.

The Company hedges a portion of known exposures using forward exchange contracts. Main exposures are related to transactions denominated in the British Pound, Euro, Canadian dollar, Australian dollar, Mexican Peso, Chinese Yuan, Malaysian Ringgit and Singapore dollar. Generally, these risk management transactions will involve the use of foreign currency derivatives to minimize the impact of currency movements on non-functional currency transactions.

The U.S. dollar equivalent notional amounts of outstanding forward exchange contracts were as follows:


	April 30, 2020		July 31, 2019
Designated as cash flow hedges	$	21,533	$	26,013
Non-designated hedges	2,707		3,376
Total foreign exchange contracts	$	24,240	$	29,389

Cash Flow Hedges

The Company has designated a portion of its forward foreign exchange contracts as cash flow hedges and recorded these contracts at fair value on the condensed consolidated balance sheets. For these instruments, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income ("OCI") and reclassified into income in the same period or periods during which the hedged transaction affects income. As of April 30, 2020 and July 31, 2019, unrealized losses of $1,166 and gains of $805 have been included in OCI, respectively.

Net Investment Hedges

The Company has designated certain third party-foreign currency denominated debt instruments as net investment hedges. On May 13, 2010, the Company completed the private placement of €75,000 aggregate principal amount of senior unsecured notes consisting of €30,000 aggregate principal amount of 3.71% Series 2010-A Senior Notes, which were repaid during fiscal 2017, and €45,000 aggregate principal amount of 4.24% Series 2010-A Senior Notes, due May 13, 2020. This Euro-denominated debt obligation was designated as a net investment hedge to selectively hedge portions of the Company's net investment in European foreign operations. The Company’s foreign denominated debt obligations are valued under a market approach using publicized spot prices, and the net gains or losses attributable to the changes in spot prices are recorded as cumulative translation within AOCI and are included in the foreign currency translation adjustments section of the condensed consolidated statements of comprehensive income. As of April 30, 2020 and July 31, 2019, the cumulative balance recognized in accumulated other comprehensive income were gains of $13,700 and $12,440, respectively, on the Euro-denominated debt obligations.

The following table summarizes the amount of pre-tax gains and losses related to derivatives designated as hedging instruments:


	Three months ended April 30,						Nine months ended April 30,
	2020		2019		2020		2019
(Losses) gains recognized in OCI:
Foreign exchange contracts (cash flow hedges)	$	(1,751)	$	220	$	(1,192)	$	377
Foreign currency denominated debt (net investment hedges)	707		1,314		1,260		2,336
Gains reclassified from OCI into cost of goods sold:
Forward exchange contracts (cash flow hedges)	293		292		779		579

Non-Designated Hedges

The Company recognized gains of $39 and $11 for the three and nine months ended April 30, 2020, respectively, and losses of $6 and $49 for the three and nine months ended April 30, 2019, respectively, in “Investment and other income” on the condensed consolidated statements of income related to non-designated hedges.

Fair values of derivative instruments in the condensed consolidated balance sheets were as follows:


	April 30, 2020										July 31, 2019
	Prepaid expenses and other current assets		Other current liabilities		Current maturities on long-term obligations		Prepaid expenses and other current assets		Other current liabilities		Current maturities on long-term obligations
Derivatives designated as hedging instruments:
Foreign exchange contracts (cash flow hedges)	$	176	$	—	$	—	$	472	$	—	$	—
Foreign currency denominated debt (net investment hedges)	—		—		48,929		—		—		50,189
Derivatives not designated as hedging instruments:
Foreign exchange contracts	65		1,360		—		2		5		—
Total derivative instruments	$	241	$	1,360	$	48,929	$	474	$	5	$	50,189