Derivative Financial Instruments

6 Months Ended

Oct. 29, 2011

Derivative Financial Instruments [Abstract]

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 October 29, 2011, PDC Funding had purchased two interest rate caps from a bank 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 bank.

Similar to the above agreements, PDC Funding II and Patterson Companies, Inc. had entered into offsetting and identical interest rate swap agreements with a notional amount of $110 million. During the second quarter of 2012, these agreements were terminated and replaced with offsetting and identical interest rate cap agreements. As of October 29, 2011 these agreements had notional amounts of $75 million and maturity dates of October 2017.

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 October 29, 2011, the agreements have notional amounts of approximately $1.0 million and $1.4 million, respectively, and maturity dates of November 2011 and February 2012, respectively.

The Company's interest rate contracts do not 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 during 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.

In the second quarter of fiscal 2011, the Company entered into a foreign currency forward contract that served to manage foreign exchange risk on a short-term intercompany loan. The forward contract and intercompany loan were both settled during the quarter. The loss on the contract was $2.0 million.

The following table presents the fair value of the Company's interest rate contracts (in millions):

		October 29,		April 30,		October 30,
Derivative type	Classification	2011		2011		2010
Assets:
Interest rate contracts	Other noncurrent assets	$	1.1	$	5.5	$	2.9
Liabilities:
Interest rate contracts	Other noncurrent liabilities	$	1.1	$	5.6	$	3.3

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

	Location of gain(loss)	Three Months Ended					Six Months Ended
Derivative type	recognized on derivative	October 29, 2011		October 30, 2010			October 29, 2011		October 30, 2010
Interest rate contracts	Other income(expense), net	$	0.0	$	0.0		$	0.0	$	0.0
Foreign currency contracts	Other income(expense), net		0.0		(2.0	)		0.0		(1.9	)