Financial Derivatives and Hedging

12 Months Ended

Oct. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Derivatives and Hedging

Note 13. Financial Derivatives and Hedging

As part of the Company’s overall risk management practices the Company enters into financial derivatives, interest rate swaps designated as cash flow hedges, to hedge the Company's exposure to changes in cash flows associated with its variable rate debt.

Credit risk related to derivative transactions reflects the risk that a party to the transaction could fail to meet its obligation under the derivative contracts. Therefore, the Company’s exposure to the counterparty’s credit risk is generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations to the counterparty. The Company’s policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings to help mitigate counterparty credit risk.

On April 6, 2020 the Company entered into six interest rate swap contracts which were used to hedge its exposure to changes in cash flows associated with its variable rate debt and were designated as derivatives in a cash flow hedge. The payment streams were based on a total notional amount of $1.5 billion at the inception of the contracts. As of October 31, 2022, three of the six interest rate swap contracts have matured and the outstanding contracts have a total notional amount of $1.0 billion and remaining maturities of five years or less..

The Company did not have any cross-currency swaps or foreign currency forward contracts as of October 31, 2022.

The pre-tax impact of gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $124.5 million ($30.1 million, net of tax) as of October 31, 2022. The pre-tax impact of gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $17.2 million ($13.1 million, net of tax) as of October 31, 2021. The fair value of derivative instruments are classified in "Other non-current assets" on our consolidated balance sheets.

The following table summarizes the amounts recognized with respect to our derivative instruments within the accompanying Consolidated Statements of Income:

Periods Ended October 31,
(In millions)		2022		2021		2020
Derivatives designated as cash flow hedges	Location of Loss (Income) Recognized on Derivatives
Interest rate swap contracts	Interest expense (income)	$	(2.3)	$	8.0	$	3.7

The Company expects that ($38.3 million) recorded as a component of accumulated other comprehensive income (loss) will be realized in the Consolidated Statements of Income over the next twelve months and the amount will vary depending on prevailing interest rates.

The following table details the changes in accumulated other comprehensive income:

(In millions)	Amount
Balance as of October 31, 2020	$	(17.1)
Amount recognized in other comprehensive income on interest rate swap contracts, gross ($20.0, net of tax)	26.3
Amount reclassified from other comprehensive income into earnings, gross ($6.1, net of tax)	8
Balance gain as of October 31, 2021	$	17.2
Amount recognized in other comprehensive income on interest rate swap contracts, gross ($79.7, net of tax)	105.1
Amount reclassified from other comprehensive income into earnings, gross ($1.7, net of tax)	2.2
Balance gain as of October 31, 2022	$	124.5