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)

9 Months Ended

Mar. 31, 2020

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 March 31,						Nine Months Ended March 31,
(In thousands)	2020			2019			2020			2019
Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness	$	—		$	(3,252	)	$	—		$	(8,649	)
Foreign exchange contracts:
Amounts included in the assessment of effectiveness	$	(19,268	)	$	1,925		$	(17,704	)	$	2,163
Amounts excluded from the assessment of effectiveness	$	(65	)	$	(53	)	$	(81	)	$	(82	)

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 March 31,										Three Months Ended March 31,
	2020										2019
(In thousands)	Revenue		Cost of Revenues and Operating Expenses		Interest Expense			Other Expense (Income), Net			Revenue		Cost of Revenues			Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded	$	1,423,964	$	1,248,000	$	39,231		$	(1,004	)	$	1,097,311	$	486,945		$	31,187	$	(9,282	)
Gains (losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	—	$	—	$	(159	)	$	—		$	—	$	—		$	150	$	—
Amount of gains (losses) reclassified from accumulated OCI to earnings as a result that a forecasted transaction is no longer probable of occurring	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—
Foreign exchange contracts:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	2,970	$	12	$	—		$	—		$	655	$	(17	)	$	—	$	158
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	$	81	$	—	$	—		$	—		$	—	$	—		$	—	$	—
Amount excluded from the assessment of effectiveness	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	(121	)
Gains (losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—	$	—		$	(4,373	)	$	—	$	—		$	—	$	513



	Nine Months Ended March 31,												Nine Months Ended March 31,
	2020												2019
(In thousands)	Revenue			Cost of Revenues and Operating Expenses			Interest Expense			Other Expense (Income), Net			Revenue		Cost of Revenues			Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statement of Operations in which the effects of cash flow hedges are recorded	$	4,346,831		$	3,297,788		$	120,053		$	(5,190	)	$	3,310,469	$	1,276,592		$	84,087	$	(28,535	)
Gains (losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	—		$	—		$	(358	)	$	—		$	—	$	—		$	527	$	—
Amount of gains (losses) reclassified from accumulated OCI to earnings as a result that a forecasted transaction is no longer probable of occurring	$	—		$	—		$	—		$	—		$	—	$	—		$	—	$	—
Foreign exchange contracts:
Amount of gains (losses) reclassified from accumulated OCI to earnings	$	3,530		$	(1,806	)	$	—		$	—		$	3,343	$	(309	)	$	—	$	158
Amount excluded from the assessment of effectiveness recognized in earnings based on an amortization approach	$	(114	)	$	—		$	—		$	—		$	80	$	(8	)	$	—	$	—
Amount excluded from the assessment of effectiveness	$	—		$	—		$	—		$	—		$	—	$	—		$	—	$	(208	)
Gains (losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—		$	—		$	—		$	8		$	—	$	—		$	—	$	576

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 seven months as of the dates indicated below were as follows:



(In thousands)	As of March 31, 2020		As of June 30, 2019
Cash flow hedge contracts - foreign currency
Purchase	$	36,378	$	31,108
Sell	$	91,259	$	113,226
Other foreign currency hedge contracts
Purchase	$	242,521	$	257,614
Sell	$	312,282	$	273,061

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 March 31, 2020		As of June 30, 2019		Balance Sheet Location	As of March 31, 2020		As of June 30, 2019
(In thousands)		Fair Value					Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets	$	601	$	397	Other current liabilities	$	316	$	2,097
Total derivatives designated as hedging instruments		601		397			316		2,097
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	9,957		2,160		Other current liabilities	590		1,237
Total derivatives not designated as hedging instruments		9,957		2,160			590		1,237
Total derivatives		$	10,558	$	2,557		$	906	$	3,334

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 March 31,						Nine Months Ended March 31,
(In thousands)	2020			2019			2020			2019
Beginning balance	$	(7,591	)	$	(5,615	)	$	(10,791	)	$	2,346
Amount reclassified to earnings	(2,904		)	(946		)	(1,252		)	(3,719		)
Net change in unrealized gains or losses	(19,333		)	(1,379		)	(17,785		)	(6,567		)
Ending balance	$	(29,828	)	$	(7,940	)	$	(29,828	)	$	(7,940	)

Offsetting of Assets and Liabilities

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



As of March 31, 2020									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	$	10,558		$	—	$	10,558		$	(782	)	$	—	$	9,776
Derivatives - Liabilities	$	(906	)	$	—	$	(906	)	$	782		$	—	$	(124	)



As of June 30, 2019									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	$	2,557		$	—	$	2,557		$	(1,397	)	$	—	$	1,160
Derivatives - Liabilities	$	(3,334	)	$	—	$	(3,334	)	$	1,397		$	—	$	(1,937	)