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Derivative Financial Instruments | 9 Months Ended
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Jan. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | We are exposed to market risks, such as changes in commodity prices, foreign currency exchange rates, and interest rates. To manage the volatility related to these exposures, we enter into various derivative transactions. We have policies in place that define acceptable instrument types we may enter into and establish controls to limit our market risk exposure. Commodity Derivatives: We enter into commodity derivatives to manage price volatility and reduce the variability of future cash flows related to anticipated inventory purchases of key raw materials, notably green coffee, soybean meal, corn, wheat, and edible oils. We also enter into commodity derivatives to manage price risk for energy input costs, including diesel fuel and natural gas. Our derivative instruments generally have maturities of less than one year. We do not qualify commodity derivatives for hedge accounting treatment, and as a result, the derivative gains and losses are immediately recognized in earnings. Although we do not perform the assessments required to achieve hedge accounting for derivative positions, we believe all our commodity derivatives are economic hedges of our risk exposure. The commodities hedged have a high inverse correlation to price changes of the derivative instrument. Thus, we would expect that over time any gain or loss in the estimated fair value of the derivatives would generally be offset by an increase or decrease in the estimated fair value of the underlying exposures. Foreign Currency Exchange Derivatives: We utilize foreign currency derivatives to manage the effect of foreign currency exchange fluctuations on future cash payments primarily related to purchases of certain raw materials and finished goods. The contracts generally have maturities of less than one year. We do not qualify instruments used to manage foreign currency exchange exposures for hedge accounting treatment. Interest Rate Derivatives: We utilize derivative instruments to manage interest rate risk associated with anticipated debt transactions, as well as to manage changes in the fair value of our long-term debt. At the inception of an interest rate contract, the instrument is evaluated and documented for qualifying hedge accounting treatment. If the contract is designated as a cash flow hedge, the mark-to-market gains or losses on the contract are deferred and included as a component of accumulated other comprehensive income (loss) and reclassified to interest expense in the period during which the hedged transaction affects earnings. If the contract is designated as a fair value hedge, the contract is recognized at fair value on the balance sheet and changes in the fair value are recognized in interest expense. Generally, changes in the fair value of the contract are equal to changes in the fair value of the underlying debt and have no net impact on earnings. The following table presents the gross notional value of outstanding derivative contracts.
| January 31, 2022 |  | April 30, 2021
Commodity contracts | $ | 969.1 |  |  | $ | 861.0 |
Foreign currency exchange contracts | 85.6 |  |  | 88.4 |
The following tables set forth the gross fair value amounts of derivative instruments recognized in the Condensed Consolidated Balance Sheets.
| January 31, 2022
| Other Current Assets |  | Other Current Liabilities |  | Other Noncurrent Assets |  | Other Noncurrent Liabilities
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Commodity contracts | $ | 30.8 |  |  | $ | 12.9 |  |  | $ | — |  |  | $ | — |
Foreign currency exchange contracts | 1.3 |  |  | 0.1 |  |  | — |  |  | — |
Total derivative instruments | $ | 32.1 |  |  | $ | 13.0 |  |  | $ | — |  |  | $ | — |
| April 30, 2021
| Other Current Assets |  | Other Current Liabilities |  | Other Noncurrent Assets |  | Other Noncurrent Liabilities
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Commodity contracts | $ | 52.6 |  |  | $ | 13.2 |  |  | $ | — |  |  | $ | — |
Foreign currency exchange contracts | 0.1 |  |  | 3.7 |  |  | — |  |  | — |
Total derivative instruments | $ | 52.7 |  |  | $ | 16.9 |  |  | $ | — |  |  | $ | — |
We have elected to not offset fair value amounts recognized for our exchange-traded derivative instruments and our cash margin accounts executed with the same counterparty that are generally subject to enforceable netting agreements. We are required to maintain cash margin accounts in connection with funding the settlement of our open positions. Our cash margin accounts represented collateral pledged of $4.6 at January 31, 2022, and collateral received of $10.8 at April 30, 2021, and are included in other current assets in the Condensed Consolidated Balance Sheets. The change in the cash margin account balances is included in other – net, investing activities in the Condensed Statements of Consolidated Cash Flows. In the event of default and immediate net settlement of all our open positions with individual counterparties, all our derivative liabilities would be fully offset by either our derivative asset positions or margin accounts based on the net asset or liability position with our individual counterparties. Cash flows associated with the settlement of derivative instruments are classified in the same line item as the cash flows of the related hedged item, which is within operating activities in the Condensed Statements of Consolidated Cash Flows. Economic Hedges The following table presents the net gains and losses recognized in cost of products sold on derivatives not designated as hedging instruments.
| Three Months Ended January 31, |  | Nine Months Ended January 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
Derivative gains (losses) on commodity contracts | $ | 12.4 |  |  | $ | 38.0 |  |  | $ | 39.1 |  |  | $ | 62.8 |
Derivative gains (losses) on foreign currency exchange contracts | 2.1 |  |  | (2.6) |  |  | 3.4 |  |  | (5.3) |
Total derivative gains (losses) recognized in cost of products sold | $ | 14.5 |  |  | $ | 35.4 |  |  | $ | 42.5 |  |  | $ | 57.5 |
Commodity and foreign currency exchange derivative gains and losses are reported in unallocated derivative gains and losses outside of segment operating results until the related inventory is sold. At that time, we reclassify the hedge gains and losses from unallocated derivative gains and losses to segment profit, allowing our segments to realize the economic effect of the hedge without experiencing any mark-to-market volatility. The following table presents the net change in cumulative unallocated derivative gains and losses.
| Three Months Ended January 31, |  | Nine Months Ended January 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
Net derivative gains (losses) recognized and classified as unallocated | $ | 14.5 |  |  | $ | 35.4 |  |  | $ | 42.5 |  |  | $ | 57.5 |
Less: Net derivative gains (losses) reclassified to segment operating profit | 36.9 |  |  | 1.6 |  |  | 80.4 |  |  | (24.0) |
Change in net cumulative unallocated derivative gains and losses | $ | (22.4) |  |  | $ | 33.8 |  |  | $ | (37.9) |  |  | $ | 81.5 |
The net cumulative unallocated derivative gains were $22.8 and $60.7 at January 31, 2022, and April 30, 2021, respectively. Cash Flow Hedges In 2020, we terminated interest rate contracts concurrent with the pricing of the Senior Notes due March 15, 2030, and March 15, 2050. They were designated as cash flow hedges and were used to manage our exposure to interest rate volatility associated with the anticipated debt financing. The termination resulted in a pre-tax loss of $239.8, which was deferred and included as a component of accumulated other comprehensive income (loss) and is being amortized as interest expense over the life of the debt. The following table presents information on the pre-tax gains and losses recognized on all contracts previously designated as cash flow hedges.
| Three Months Ended January 31, |  | Nine Months Ended January 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
Gains (losses) recognized in other comprehensive income (loss) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss) to interest expense – net (A) | (3.4) |  |  | (3.5) |  |  | (10.4) |  |  | (10.4) |
Less: Gains (losses) reclassified from accumulated other comprehensive income (loss) to other income (expense) – net (B) | — |  |  | — |  |  | 0.6 |  |  | — |
Change in accumulated other comprehensive income (loss) | $ | 3.4 |  |  | $ | 3.5 |  |  | $ | 9.8 |  |  | $ | 10.4 |
(A)Interest expense – net, as presented in the Condensed Statements of Consolidated Income was $39.5 and $43.5 for the three months ended January 31, 2022 and 2021, respectively, and was $122.9 and $134.7 for the nine months ended January 31, 2022 and 2021, respectively. (B)Other expense – net, as presented in the Condensed Statements of Consolidated Income was $1.5 and $1.2 for the three months ended January 31, 2022 and 2021, respectively, and was $15.3 and $34.8 for the nine months ended January 31, 2022 and 2021, respectively. The reclassification is related to the debt extinguishment during the first quarter of 2022, as discussed in Note 8: Debt and Financing Arrangements. Included as a component of accumulated other comprehensive income (loss) at January 31, 2022, and April 30, 2021, were deferred net pre-tax losses of $217.5 and $227.3, respectively, related to the terminated interest rate contracts. The related net tax benefit recognized in accumulated other comprehensive income (loss) at January 31, 2022, and April 30, 2021, was $51.1 and $52.5, respectively. Approximately $13.4 of the net pre-tax loss will be recognized over the next 12 months related to the terminated interest rate contracts. Fair Value Hedges In 2015, we terminated the interest rate swap on the Senior Notes due October 15, 2021, which was designated as a fair value hedge and used to hedge against the changes in the fair value of the debt. As a result of the early termination, we received $58.1 in cash, which included $4.6 of accrued and prepaid interest. The gain on termination was recorded as an increase in the long-term debt balance and was recognized over the life of the debt as a reduction of interest expense. As of the second quarter of 2022, we had fully recognized the gain of $53.5, of which $4.0 was recognized during the nine months ended January 31, 2022, and $2.2 and $6.4 was recognized during three and nine months ended January 31, 2021, respectively.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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