Derivatives and Hedging Activities (Notes)

3 Months Ended

Oct. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

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 on 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.

Main foreign currency 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:

	October 31, 2021		July 31, 2021
Designated as cash flow hedges	$	23,052	$	30,724
Non-designated hedges	3,521		3,580
Total foreign exchange contracts	$	26,573	$	34,304

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 October 31, 2021 and July 31, 2021, unrealized gains of $73 and $770 have been included in OCI, respectively.

The following table summarizes the amount of pre-tax gains and losses related to foreign exchange contracts designated as cash flow hedging instruments:

	Three months ended October 31,
	2021		2020
(Losses) gains recognized in OCI	$	(26)	$	697
Gains (losses) reclassified from OCI into cost of goods sold	568		(211)

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

	October 31, 2021				July 31, 2021
	Prepaid expenses and other current assets		Other current liabilities		Prepaid expenses and other current assets		Other current liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts (cash flow hedges)	$	141	$	104	$	150	$	51
Derivatives not designated as hedging instruments:
Foreign exchange contracts (non-designated hedges)	—		20		—		—
Total derivative instruments	$	141	$	124	$	150	$	51