Derivative Financial Instruments

3 Months Ended

Jan. 31, 2018

Derivative Financial Instruments Disclosure [Abstract]

Derivative Financial Instruments

4.Derivative Financial Instruments

Derivative financial instruments designated as cash flow hedges

In April 2017, the Company issued $300.0 million in aggregate principal amount of 3.5 percent ten-year senior notes due April 6, 2027 (2027 Senior Notes). The Company entered into a Treasury lock transaction with a notional amount of $125.0 million and concurrently designated the Treasury lock as a cash flow hedge of its exposure to variability in the forecasted semi-annual interest payments on $125.0 million of principal outstanding on the 2027 Senior Notes. The benchmark U.S. Treasury rate declined from the time the Treasury lock was entered into until the time the 2027 Senior Notes were priced, and the Treasury lock was net settled for cash at a loss of $0.7 million. The Treasury lock was determined to be a highly effective cash flow hedge and the entire $0.7 million loss, net of the associated deferred tax benefit of $0.3 million, was recorded in other comprehensive income (loss), net of tax. The Company reclassified $17,000 of this deferred loss into interest expense during the three months ended January 31, 2018 and will reclassify the remaining $0.6 million of unamortized loss as of January 31, 2018 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 $68,000 of the loss into interest expense.

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), net of tax. The Company reclassified $50,000 of the deferred gain into interest expense during both the three months ended January 31, 2018 and 2017 and will reclassify the remaining $1.1 million of unamortized gain as of January 31, 2018 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 $0.2million of the gain into interest expense.

Other derivative financial instruments not designated for hedge accounting

The Company utilizes stock index futures contracts, total return swap contracts, foreign exchange contracts, commodity futures contracts, currency futures contracts and interest rate futures contracts to hedge the marketand currency risks associated with its investments in certain consolidated seed investments.

The Company was a party to the following derivative financial instruments at January 31, 2018 and October 31, 2017:

	January 31, 2018			October 31, 2017
	Number of Contracts		Notional Value (in millions)	Number of Contracts		Notional Value (in millions)
Stock index futures contracts	1,287	$	119.1	1,470	$	118.1
Total return swap contracts	6	$	106.5	2	$	50.2
Foreign exchange contracts	38	$	30.9	31	$	28.1
Commodity futures contracts	178	$	9.2	213	$	10.2
Currency futures contracts	127	$	14.3	131	$	14.5
Interest rate futures contracts	141	$	28.8	134	$	25.6

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, 2018 and October 31, 2017are 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, 2018 and October 31, 2017:

	January 31, 2018				October 31, 2017
(in thousands)		Other Assets		Other Liabilities		Other Assets		Other Liabilities
Stock index futures contracts	$	308	$	7,731	$	330	$	3,021
Total return swap contracts		-		1,195		-		570
Foreign exchange contracts		222		1,075		650		60
Commodity futures contracts		66		88		63		120
Currency futures contracts		274		498		327		178
Interest rate futures contracts		277		182		48		226
Total	$	1,147	$	10,769	$	1,418	$	4,175

Changes in the fair value of derivative contracts are recognized in gains (losses) and other investment income, net (see Note 12). The Company recognized the following net gains (losses) on derivative financial instruments for the three months ended January 31, 2018 and 2017:

	Three Months Ended
	January 31,
(in thousands)		2018		2017
Stock index futures contracts	$	(7,656)	$	(5,933)
Total return swap contracts		(625)		(964)
Foreign exchange contracts		(899)		(27)
Commodity futures contracts		(403)		-
Interest rate futures contracts		84		-
Currency futures contracts		(86)		-
Net realized gains (losses)	$	(9,585)	$	(6,924)

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.