Derivative Financial Instruments

3 Months Ended

Jul. 30, 2011

Derivative Financial Instruments

Derivative Financial Instruments

NOTE 3 DERIVATIVE FINANCIAL INSTRUMENTS

The Company is a party to certain offsetting and identical interest rate cap agreements. These cap agreements are not designated for hedge accounting treatment and were entered into to fulfill certain covenants of a sale agreement between a commercial paper conduit managed by The Bank of Tokyo-Mitsubishi UFJ, Ltd. and PDC Funding. Prior to the Third Amended and Restated Receivables Purchase Agreement entered into on December 3, 2010, the commercial paper conduit was managed by JPMorgan Chase Bank, N.A. The cap agreements provide a credit enhancement feature for the financing contracts sold by PDC Funding to the commercial paper conduit and replace a minimum interest rate margin previously required under the sale agreement.

The cap agreements are cancelled and new agreements entered into periodically to maintain consistency with the dollar maximum of the sale agreements and the maturity of the underlying financing contracts. As of July 30, 2011, PDC Funding had purchased two interest rate caps from banks with combined notional amounts of $500 million and maturity dates of September 2018. Patterson Companies, Inc. sold two identical interest rate caps to the same banks. Similar to the above agreements, PDC Funding II and Patterson Companies, Inc. entered into offsetting and identical interest rate swap agreements. These agreements have a notional amount of $110 million and a maturity date of July 2015.

In addition to the identical purchased and sold interest rate contracts described above, the Company has entered into two interest rate swap agreements with banks to economically hedge the interest rate risk associated with our finance contracts. As of July 30, 2011, the agreements have notional amounts of approximately $4 million and $3 million, respectively, and maturity dates of November 2011 and February 2012, respectively.

None of the Company's interest rate contracts qualify for hedge accounting treatment and, accordingly, the Company records the fair value of the agreements as an asset or liability and the change in any period as income or expense of the period in which the change occurs.

In the first quarter of fiscal 2011, the Company entered into a foreign currency forward contract that was settled in the same quarter. This contract served as an economic hedge and was not designated as a hedge for accounting purposes. The total gain on the contract was $0.1 million.

The following table presents the fair value of the Company's interest rate contracts:

Derivative type	Classification	July 30, 2011		April 30, 2011		July 31, 2010
		(in millions)
Assets:
Interest rate contracts	Other noncurrent assets	$	3.1	$	5.5	$	4.9
Liabilities:
Interest rate contracts	Other noncurrent liabilities	$	3.1	$	5.6	$	5.5

The following table presents the effect of interest rate and foreign currency contracts on the consolidated statements of income:

		Three Months Ended
Derivative type	Location of gain(loss) recognized on derivative	July 30, 2011			July 31, 2010
		(in millions)
Interest rate contracts	Other income(expense), net	$	(0.0	)	$	(0.0	)
Foreign currency contracts	Other income(expense), net		—		$	0.1