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Derivative Financial Instruments
 3 Months Ended
Jan. 31, 2017
Derivative Financial Instruments Disclosure [Abstract]  
Derivative Financial Instruments

5.       Derivative Financial Instruments

 

Derivative financial instruments designated as cash flow hedges

 

In fiscal 2013, the Company entered into a forward-starting interest rate swap in connection with the offering of its 3.625 percent unsecured senior notes due June 15, 2023 (2023 Senior Notes) and recorded the unamortized gain on the swap in other comprehensive income (loss). The Company reclassified $50,000 of the deferred gain into interest expense during both the three months ended January 31, 2017 and 2016 and will reclassify the remaining $1.3 million of unamortized gain as of January 31, 2017 to earnings as a component of interest expense over the remaining term of the debt. During the next twelve months, the Company expects to reclassify approximately $0.2 million of the gain into interest expense.

 

In fiscal 2007, the Company entered into a Treasury lock transaction in connection with the offering of its 6.5 percent unsecured senior notes due October 2, 2017 (2017 Senior Notes) and recorded the unamortized loss on the lock in other comprehensive income (loss). The Company reclassified $56,000 of the deferred loss into interest expense during both the three months ended January 31, 2017 and 2016 and will reclassify the remaining $0.1 million of unamortized loss at January 31, 2017 to earnings as a component of interest expense over the next eight months, which represents the remaining term of the debt.

Other derivative financial instruments not designated for hedge accounting

 

The Company utilizes stock index futures contracts, total return swap contracts and foreign exchange contracts to hedge the market and currency risks associated with its investments in certain consolidated sponsored funds and separately managed accounts seeded for new product development purposes (consolidated seed investments).

 

The Company was a party to the following derivative financial instruments at January 31, 2017 and October 31, 2016:

  January 31, 2017 October 31, 2016
  Number of contracts Notional value (in millions) Number of contracts Notional value (in millions)
 Stock index futures contracts 1,837$ 132.8  1,721$ 125.4
 Total return swap contracts 1$ 35.5  1$ 40.0
 Foreign exchange contracts 25$ 17.4  32$ 18.7

The Company has not designated any of these derivative contracts as hedging instruments for accounting purposes. The derivative contracts outstanding, and the notional values they represent at January 31, 2017 and October 31, 2016, are representative of derivative balances throughout each respective period.

 

The Company has not elected to offset fair value amounts related to derivative instruments executed with the same counterparty under master netting arrangements; as a result, the Company records all derivative financial instruments as either other assets or other liabilities, gross, on its Consolidated Balance Sheets and measures them at fair value. The following tables present the fair value of derivative financial instruments not designated for hedge accounting and how they are reflected in the Company's Consolidated Financial Statements as of January 31, 2017 and October 31, 2016:

  January 31, 2017 October 31, 2016
 (in thousands) Other assets Other liabilities  Other assets Other liabilities
 Stock index futures contracts$ 201$ 2,514 $ 1,722$ 130
 Foreign exchange contracts  128  160   350  267
 Total return swap contracts  -  1,277   -  418
 Total$ 329$ 3,951 $ 2,072$ 815

Changes in the fair value of derivative contracts are recognized in gains and other investment income, net (see Note 13). The Company recognized the following net gains (losses) on derivative financial instruments for the three months ended January 31, 2017 and 2016:

  Three Months Ended
  January 31,
 (in thousands) 2017 2016
 Stock index futures contracts$ (5,933)$ 8,983
 Foreign exchange contracts  (27)  634
 Total return swap contracts  (964)  2,770
 Total$ (6,924)$ 12,387

In addition to the derivative contracts described above, certain consolidated seed investments may utilize derivative financial instruments within their portfolios in pursuit of their stated investment objectives. See Note 3 for discussion of consolidated sponsored funds.