Financial Derivatives and Hedging

3 Months Ended

Jan. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 12. Financial Derivatives and Hedging

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 January 31, 2023, 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 January 31, 2023.

The interest rate swap contracts are fair valued by netting discounted future fixed cash payments and the discounted expected variable cash receipts, which are estimated based on observable market interest rate curves (Level 2). The cumulative pre-tax impact of the gain on derivatives designated for hedge accounting recognized in accumulated other comprehensive income was $96.7 million ($73.4 million, net of tax) as of January 31, 2023, and $34.8 million ($26.4 million, net of tax) as of January 31, 2022. The fair value of derivative instruments are classified in "Other non-current assets" on our Consolidated Condensed Balance Sheets.

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


Period Ended January 31,		Three Months
(In millions)		2023		2022
Derivatives designated as cash flow hedges	Location of (Gain)/Loss Recognized on Derivatives
Interest rate swap contracts	Interest (income) expense	$	(8.3)	$	1.9

The Company expects that $38.1 million recorded as a component of accumulated other comprehensive loss will be realized in the Consolidated Statements of Income and Comprehensive 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:


Period Ended January 31,	Three Months
(In millions)	2023		2022
Beginning balance gain	$	124.5	$	17.2
Amount recognized in other comprehensive income on interest rate swap contracts, gross ($(14.8) million, net of tax and $11.9 million, net of tax, respectively)	(19.5)		15.7
Amount reclassified from other comprehensive income into earnings, gross ($(6.2) million, net of tax and $1.4 million, net of tax, respectively)	(8.3)		1.9
Ending balance gain	$	96.7	$	34.8