• Filing Date: 2020-06-12
  • Form Type: 10-Q
  • Description: Quarterly report
v3.20.1
Derivative Instruments
9 Months Ended
Apr. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

Note 4—Derivative Instruments

 

The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S. Dollar – Norwegian Kroner (NOK) exchange rate. The Company is party to a Foreign Exchange Agreement with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 9). The Company does not apply hedge accounting to these contracts, and therefore the changes in fair value are recorded in consolidated statements of comprehensive loss. By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The credit or repayment risk is minimized by entering into transactions with high-quality counterparties.

 

The outstanding contracts at April 30, 2020, are as follows:

 

Settlement Date  U.S. Dollar Amount   NOK Amount 
May-20   350,000    3,216,464 
Jun-20   350,000    3,216,359 
Jul-20   350,000    3,216,114 
Aug-20   350,000    3,216,324 
Total  $1,400,000    12,865,261 

 

The fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were as follows:

 

 

Derivatives Instruments

  Balance Sheet Location  April 30,
2020
   July 31,
2019
 
      (in thousands) 
Derivatives not designated or not qualifying as hedging instruments:           
Foreign exchange forward contracts  Accrued expenses and other current liabilities  $145   $38 
              

 

The effects of derivative instruments on the consolidated statements of comprehensive loss were as follows:

  

      Amount of Loss Recognized on Derivatives 

 

    Three Months Ended   Nine Months Ended 
      April 30,   April 30, 
Derivatives not designated or not qualifying as hedging instruments  Statement of Comprehensive Loss Location  2020   2019   2020   2019 
      (in thousands)   (in thousands) 
Foreign exchange forward contracts  Net loss resulting from foreign exchange transactions  $273   $80   $327   $254