KLA Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments and Hedging Activities (Tables)

Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments, Location, Designated and Non-Designated, Gains (Losses)

The gains (losses) on derivatives in cash flow hedging relationships recognized in OCI for the indicated periods were as follows:



	Three months ended					Six months ended
	December 31,					December 31,
(In thousands)	2018			2017		2018			2017
Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness	$	(17,752	)	$	—	$	(5,396	)	$	—
Foreign exchange contracts:
Amounts included in the assessment of effectiveness	$	(1,201	)	$	697	$	237		$	1,141
Amounts excluded from the assessment of effectiveness	$	(29	)	$	—	$	(29	)	$	—

The locations and amounts of designated and non-designated derivative’s gains and losses reported in the condensed consolidated statements of operations for the indicated periods were as follows:



	Three months ended December 31,										Three months ended December 31,
	2018										2017
(In thousands)	Revenue		Cost of revenues			Interest expense		Other income (expense), net			Revenue		Cost of revenues		Interest expense		Other income (expense), net
Total amounts presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded	$	1,119,898	$	408,260		$	26,538	$	(9,228	)	$	975,822	$	347,002	$	27,372	$	(7,824	)
Gains (losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	—	$	—		$	189	$	—		$	—	$	—	$	—	$	—
Amount of gains (losses) reclassified from accumulated OCI to earnings as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—		$	—	$	(108	)	$	—	$	—	$	—	$	—
Foreign exchange contracts:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	1,705	$	(158	)	$	—	$	(3	)	$	397	$	377	$	189	$	—
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	$	80	$	(8	)	$	—	$	—		$	—	$	—	$	—	$	—
Amount excluded from the assessment of effectiveness	$	—	$	—		$	—	$	(220	)	$	—	$	—	$	—	$	(158	)
Gains (losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—		$	—	$	(3,700	)	$	—	$	—	$	—	$	3,237



	Six months ended December 31,										Six months ended December 31,
	2018										2017
(In thousands)	Revenue		Cost of revenues			Interest expense		Other income (expense), net			Revenue		Cost of revenues		Interest expense		Other income (expense), net
Total amounts presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded	$	2,213,158	$	789,647		$	52,900	$	(19,253	)	$	1,945,403	$	700,119	$	57,948	$	(12,207	)
Gains (losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	—	$	—		$	377	$	—		$	—	$	—	$	—	$	—
Amount of gains (losses) reclassified from accumulated OCI to earnings as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—		$	—	$	4		$	—	$	—	$	—	$	—
Foreign exchange contracts:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	2,688	$	(292	)	$	—	$	(18	)	$	1,365	$	1,338	$	378	$	—
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	$	80	$	(8	)	$	—	$	—		$	—	$	—	$	—	$	—
Amount excluded from the assessment of effectiveness	$	—	$	—		$	—	$	(88	)	$	—	$	—	$	—	$	(229	)
Gains (losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—		$	—	$	63		$	—	$	—	$	—	$	3,676

Schedule of Notional Amounts of Derivatives Outstanding

The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts, with maximum remaining maturities of approximately ten months as of December 31, 2018 and June 30, 2018, were as follows:



(In thousands)	As of December 31, 2018		As of June 30, 2018
Cash flow hedge contracts - foreign currency
Purchase	$	777	$	8,116
Sell	$	84,302	$	115,032
Other foreign currency hedge contracts
Purchase	$	163,758	$	130,442
Sell	$	173,793	$	154,442

Schedule of Derivative Instruments, Fair Value

The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:



	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	As of December 31, 2018		As of June 30, 2018		Balance Sheet Location	As of December 31, 2018		As of June 30, 2018
(In thousands)		Fair Value					Fair Value
Derivatives designated as hedging instruments
Rate lock contracts	Other current assets	$	—	$	219	Other current liabilities	$	10,955	$	5,158
Foreign exchange contracts	Other current assets	102		3,259		Other current liabilities	649		312
Total derivatives designated as hedging instruments		102		3,478			11,604		5,470
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	1,630		1,907		Other current liabilities	2,714		1,358
Total derivatives not designated as hedging instruments		1,630		1,907			2,714		1,358
Total derivatives		$	1,732	$	5,385		$	14,318	$	6,828

Balances and Changes in Accumulated Other Comprehensive Income Related to Derivative Instruments

The changes in OCI, before taxes, related to derivatives for the indicated periods were as follows:



	Three months ended December 31,						Six months ended December 31,
(In thousands)	2018			2017			2018			2017
Beginning balance	$	15,103		$	6,452		$	2,346		$	8,126
Amount reclassified to earnings	(1,736		)	(963		)	(2,773		)	(3,081		)
Net change in unrealized gains or losses	(18,982		)	697			(5,188		)	1,141
Ending balance	$	(5,615	)	$	6,186		$	(5,615	)	$	6,186

Offsetting of Assets and Liabilities

information related to the offsetting arrangements for the periods indicated was as follows (in thousands):



As of December 31, 2018									Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
Description	Gross Amounts of Derivatives			Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets			Financial Instruments			Cash Collateral Received		Net Amount
Derivatives - Assets	$	1,732		$	—	$	1,732		$	(995	)	$	—	$	737
Derivatives - Liabilities	$	(14,318	)	$	—	$	(14,318	)	$	995		$	—	$	(13,323	)



As of June 30, 2018									Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
Description	Gross Amounts of Derivatives			Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets			Financial Instruments			Cash Collateral Received		Net Amount
Derivatives - Assets	$	5,385		$	—	$	5,385		$	(1,888	)	$	—	$	3,497
Derivatives - Liabilities	$	(6,828	)	$	—	$	(6,828	)	$	1,888		$	—	$	(4,940	)