Financial Derivatives and Hedging

9 Months Ended

Jul. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 12. Financial Derivatives and Hedging

As of July 31, 2023, the Company has six interest rate swap contracts that have a total notional amount of $1.3 billion and remaining maturities of four years or less. 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 fair value of the interest rate swap contracts are classified in "Other assets" on our Consolidated Condensed Balance Sheets.

From time to time, the Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables. These foreign currency forward contracts are not designated as hedging instruments, and therefore the net change in their fair value is reported as a gain or loss in the Consolidated Condensed Statements of Income and Comprehensive Income. As of July 31, 2023, the notional amount of outstanding foreign currency forward contracts was $97.5 million. The resulting impact on our consolidated financial statement from currency hedging activities was not significant for the three and nine months ended July 31, 2023, and July 31, 2022.

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


Periods Ended July 31,		Three Months				Nine Months
(In millions)		2023		2022		2023		2022
Derivatives designated as cash flow hedges	Location of (Gain)/Loss Recognized on Derivatives
Interest rate swap contracts	Interest expense	$	(12.1)	$	(0.9)	$	(30.3)	$	2.4

The cumulative pre-tax impact of the gain on derivatives designated for hedge accounting is recognized in "Accumulated other comprehensive loss". The following table details the changes in the cumulative pre-tax impact of the gain on derivatives designated for hedge accounting:


Periods Ended July 31,	Three Months				Nine Months
(In millions)	2023		2022		2023		2022
Beginning balance gain	$	89.5	$	86.8	$	124.5	$	17.2
Amount recognized in accumulated other comprehensive loss on interest rate swap contracts, gross	31.4		(13.0)		14.6		53.3
Amount reclassified from accumulated other comprehensive loss into earnings, gross	(12.1)		(0.9)		(30.3)		2.4
Ending balance gain	$	108.8	$	72.9	$	108.8	$	72.9

The amount recognized in other comprehensive income on interest rate swap contracts was $23.8 million and $11.1 million, net of tax, for the three and nine months ended July 31, 2023, respectively, and $(9.8) million and $40.4 million, net of tax, for the three and nine months ended July 31, 2022, respectively.

The amount reclassified from other comprehensive income into earnings was $(9.2) million and $(23.0) million, net of tax, for the three and nine months ended July 31, 2023, respectively, and $(0.7) million and $1.8 million, net of tax, for the three and nine months ended July 31, 2022, respectively.

The Company expects that $47.9 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.