6. Financial Instruments

The following tables show the Company’s financial instruments and balance sheet classification as of October 31, 2017 and April 30, 2017:


	October 31, 2017
	Fair Value Measurement										Balance Sheet Classification
	Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities			Income Taxes & Other Receivables
	(in thousands)
Level 1:
Cash	$	281,605	$	—	$	—		$	281,605		$	281,605	$	—	$	—	$	—		$	—
Money market funds		1,020		—		—			1,020			1,020		—		—		—			—
Mutual funds (1)		119,619		12,089		(471	)		131,237			—		13,671		117,566		—			—

Total	$	402,244	$	12,089	$	(471	)	$	413,862		$	282,625	$	13,671	$	117,566	$	—		$	—

Level 2:
Foreign currency forward contracts	$	—	$	1,528	$	(1,075	)	$	453		$	—	$	—	$	—	$	(601	)	$	1,054
Interest rate swap	$	—	$	—	$	(303	)	$	(303	)	$	—	$	—	$	—	$	(303	)	$	—


	April 30, 2017
	Fair Value Measurement										Balance Sheet Classification
	Cost		Unrealized Gains		Unrealized Losses			Fair Value			Cash and Cash Equivalents		Marketable Securities, Current		Marketable Securities, Non-current		Other Accrued Liabilities			Income Taxes & Other Receivables
	(in thousands)
Level 1:
Cash	$	409,824	$	—	$	—		$	409,824		$	409,824	$	—	$	—	$	—		$	—
Money market funds		1,058		—		—			1,058			1,058		—		—		—			—
Mutual funds (1)		113,818		6,697		(578	)		119,937			—		4,363		115,574		—			—

Total	$	524,700	$	6,697	$	(578	)	$	530,819		$	410,882	$	4,363	$	115,574	$	—		$	—

Level 2:
Foreign currency forward contracts	$	—	$	129	$	(846	)	$	(717	)	$	—	$	—	$	—	$	(717	)	$	—
Interest rate swap	$	—	$	—	$	(947	)	$	(947	)	$	—	$	—	$	—	$	(947	)	$	—

(1)

These investments are held in trust for settlement of the Company’s vested obligations of $115.7 million and $99.5 million as of October 31, 2017 and April 30, 2017, respectively, under the ECAP (see Note 7 — Deferred Compensation and Retirement Plans). During the three and six months ended October 31, 2017, the fair value of the investments increased; therefore, the Company recognized income of $3.4 million and $6.8 million, respectively, which was recorded in other income (loss), net. During the three months ended October 31, 2016, the fair value of the investments decreased; therefore, the Company recognized a loss of $0.7 million, which was recorded in other income (loss), net. During the six months ended October 31, 2016, the fair value of the investments increased; therefore, the Company recognized income of $3.2 million, which was recorded in other income (loss), net.

Investments in marketable securities classified as trading are based upon investment selections the employee elects from a pre-determined set of securities in the ECAP and the Company invests in marketable securities to mirror these elections. As of October 31, 2017 and April 30, 2017, the Company’s investments in marketable securities classified as trading consist of mutual funds for which market prices are readily available.

Designated Derivatives - Interest Rate Swap Agreement

In March 2017, the Company entered into an interest rate swap contract with a notional amount of $129.8 million, to hedge the variability to changes in cash flows attributable to interest rate risks caused by changes in interest rates related to its variable rate debt. The Company has designated the swap as a cash flow hedge. The notional amount will be amortized so that the amount is always half of the principal balance of the debt outstanding. As of October 31, 2017, the notional amount was $124.6 million. The interest rate swap agreement matures on June 15, 2021 and locks the interest rates on half the debt outstanding at 1.919%, exclusive of the credit spread on the debt.

The fair value of the derivative designated as a cash flow hedge instrument is as follows:


	October 31, 2017		April 30, 2017
	(in thousands)
Derivative liability:
Interest rate swap contract	$	303	$	947

During the three and six months ended October 31, 2017, the Company recognized the following gains and losses on the interest rate swap:


	Three Months Ended		Six Months Ended
	October 31, 2017
	(in thousands)
Gains recognized in other comprehensive income (net of tax effects of $205 and $56, respectively)	$	322	$	88
Losses reclassified from accumulated other comprehensive income into interest expense, net	$	220	$	500

As the critical terms of the hedging instrument and the hedged forecasted transaction are the same, the Company has concluded that the changes in the fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis.

We estimate that $0.5 million of derivative losses included in accumulated other comprehensive income as of October 31, 2017 will be reclassified into other expense within the following 12 months. The cash flows related to the interest rate swap contract are included in net cash provided by operating activities.

Non-Designated Derivatives – Foreign Currency Forward Contracts

The fair value of derivatives not designated as hedge instruments are as follows:


	October 31, 2017			April 30, 2017
	(in thousands)
Derivative assets:
Total gross amount of foreign currency forward contracts	$	1,528		$	—
Gross derivatives offset on the balance sheet (1)		(474	)		—

Net amounts presented on the balance sheet	$	1,054		$	—

Derivative liabilities:
Total gross amount of foreign currency forward contracts	$	1,075		$	846
Gross derivatives offset on the balance sheet (1)		(474	)		(129	)

Net amounts presented on the balance sheet	$	601		$	717

(1)	These amounts represent the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement exists and fair value of adjustments related to our counterparty credit risk.

As of October 31, 2017, the total notional amounts of the forward contracts purchased and sold were $22.4 million and $63.2 million, respectively. As of April 30, 2017, the total notional amounts of the forward contracts purchased and sold were $19.4 million and $70.0 million, respectively. During the three months ended October 31, 2017, the Company incurred gains of $0.3 million related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income. During the six months ended October 31, 2017, the Company incurred losses of $2.3 million related to forward contracts which is recorded in general and administrative expenses in the accompanying consolidated statements of income. These losses offset foreign currency gains that result from transactions denominated in a currency other than the Company’s functional currency. During the three and six months ended October 31, 2016, the Company incurred gains of $0.2 million for both periods related to forward contracts. The cash flows related to foreign currency forward contracts are included in net cash used in operating activities.