Derivative Financial Instruments

6 Months Ended

Oct. 24, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We are a party to certain offsetting and identical interest rate cap agreements entered into to fulfill certain covenants of the equipment finance contract sale agreements. The interest rate cap agreements also provide a credit enhancement feature for the financing contracts sold by PDC Funding and PDC Funding II to the commercial paper conduit.

The interest rate cap agreements are canceled and new agreements are entered into periodically to maintain consistency with the dollar maximum of the sale agreements and the maturity of the underlying financing contracts. As of October 24, 2020, PDC Funding had purchased an interest rate cap from a bank with a notional amount of $525,000 and a maturity date of August 2028. We sold an identical interest rate cap to the same bank. As of October 24, 2020, PDC Funding II had purchased an interest rate cap from a bank with a notional amount of $100,000 and a maturity date of November 2027. We sold an identical interest rate cap to the same bank.

These interest rate cap agreements do not qualify for hedge accounting treatment and, accordingly, we record the fair value of the agreements as an asset or liability and the change as income or expense during the period in which the change occurs.

In January 2014, we entered into a forward interest rate swap agreement with a notional amount of $250,000 and accounted for it as a cash flow hedge, in order to hedge interest rate fluctuations in anticipation of refinancing the 5.17% senior notes due March 25, 2015. These notes were repaid on March 25, 2015 and replaced with new $250,000 3.48% senior notes due March 24, 2025. A cash payment of $29,003 was made in March 2015 to settle the interest rate swap. This amount is recorded in other comprehensive income (loss), net of tax, and is recognized as interest expense over the life of the related debt.

We utilize forward interest rate swap agreements to hedge against interest rate fluctuations that impact the amount of net sales we record related to our customer financing contracts. These interest rate swap agreements do not qualify for hedge accounting treatment and, accordingly, we record the fair value of the agreements as an asset or liability and the change as income or expense during the period in which the change occurs.

As of April 25, 2020, the remaining notional amount for interest rate swap agreements was $634,029, with the latest maturity date in fiscal 2027. During the six months ended October 24, 2020, we entered into forward interest rate swap agreements with a notional amount of $125,458. As of October 24, 2020, the remaining notional amount for interest rate swap agreements was $663,114, with the latest maturity date in fiscal 2028.

Net cash payments of $5,116 and $615 were made during the six months ended October 24, 2020 and October 26, 2019, respectively, to settle a portion of our liabilities related to interest rate swap agreements. These payments are reflected as cash outflows in the condensed consolidated statements of cash flows within net cash used in operating activities.

The following presents the fair value of derivative instruments included in the condensed consolidated balance sheets:


Derivative type	Classification	October 24, 2020		April 25, 2020
Assets:
Interest rate contracts	Other non-current assets	$	365	$	204
Liabilities:
Interest rate contracts	Other accrued liabilities	5,160		6,789
Interest rate contracts	Other non-current liabilities	10,513		13,060
Total liability derivatives		$	15,673	$	19,849

The following tables present the pre-tax effect of derivative instruments on the condensed consolidated statements of operations and other comprehensive income:


		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
		Three Months Ended				Six Months Ended
Derivatives in cash flow hedging relationships	Statements of operations location	October 24, 2020		October 26, 2019		October 24, 2020		October 26, 2019
Interest rate contracts	Interest expense	$	(342)	$	(725)	$	(682)	$	(1,450)


		Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended				Six Months Ended
Derivatives not designated as hedging instruments	Statements of operations location	October 24, 2020		October 26, 2019		October 24, 2020		October 26, 2019
Interest rate contracts	Other income, net	$	415	$	(1,778)	$	(780)	$	(5,563)

There were no gains or losses recognized in other comprehensive income (loss) on cash flow hedging derivatives during the three and six months ended October 24, 2020 or October 26, 2019.

We recorded no ineffectiveness during the three and six month periods ended October 24, 2020 and October 26, 2019. As of October 24, 2020, the estimated pre-tax portion of accumulated other comprehensive loss that is expected to be reclassified into earnings over the next twelve months is $1,363, which will be recorded as an increase to interest expense.