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Derivative Instruments and Hedging Activities | 9 Months Ended
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Jan. 28, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Note 7. Derivative Instruments and Hedging Activities The Company is exposed to various market risks including, but not limited to, foreign currency exchange rates and market interest rates. The Company strives to control its exposure to these risks through our normal operating activities and, where appropriate, through the use of derivative financial instruments. Derivative financial instruments are measured at fair value on a recurring basis. For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded in accumulated other comprehensive income (“AOCI”) in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCI is recorded in earnings and reflected in the condensed consolidated statements of income on the same line as the gain or loss on the hedged item attributable to the hedged risk. The gain or loss associated with changes in the fair value of derivatives not designated as hedges are recorded immediately in the condensed consolidated statements of income on the same line as the associated risk. For a designated net investment hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded as a cumulative translation adjustment in AOCI in the condensed consolidated balance sheets. Net investment hedges The Company has a variable-rate, cross-currency swap, maturing on August 31, 2023, with a notional value of $60.0 million (€54.8 million). The Company entered into the cross-currency swap to mitigate changes in net assets due to changes in U.S. dollar-euro spot exchange rates. The cross-currency swap is designated as a hedge of the Company’s net investment in a euro-based subsidiary. Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company recognizes the impact of all other changes in fair value of the derivative, which represents the interest rate differential of the cross-currency swap, through interest expense. For the three months ended January 28, 2023 and January 29, 2022, the Company recorded gains of $0.4 million and $0.1 million, respectively, in interest expense, net in the condensed consolidated statements of income. For the nine months ended January 28, 2023 and January 29, 2022, the Company recorded gains of $1.3 million and $0.2 million, respectively, in interest expense, net in the condensed consolidated statements of income. Interest rate swaps The Company has interest rate swaps, maturing on August 31, 2023, with a notional value of $100.0 million, to manage its exposure to, and to mitigate the impact of, interest rate variability. The interest rate swaps are designated as cash flow hedges. Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter. The effective portion of the periodic changes in fair value is recognized in AOCI in the condensed consolidated balance sheets. Subsequently, the accumulated gains and losses recorded in AOCI are reclassified to income in the period during which the hedged cash flow impacts earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three or nine months ended January 28, 2023 and January 29, 2022. Derivatives not designated as hedges The Company uses short-term foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-functional currency balance sheet exposures. These forward contracts are not designated as hedging instruments. Gains and losses on these forward contracts are recognized in other income, net, along with the foreign currency gains and losses on monetary assets and liabilities, in the condensed consolidated statements of income. As of January 28, 2023 and April 30, 2022, the Company held foreign currency forward contracts with a notional value of $107.6 million and $38.6 million, respectively. During the three and nine months ended January 28, 2023, the Company recognized a gain of $1.6 million and loss of $1.2 million, respectively, related to foreign currency forward contracts in the condensed consolidated statements of income. During the three and nine months ended January 29, 2022, a gain of $0.5 million and $0.7 million, respectively, was recognized in the condensed consolidated statements of income. Fair value of derivative instruments on the balance sheet The fair value of derivative instruments are classified as Level 2 within the fair value hierarchy and are recorded in the balance sheets as follows:
|  |  |  | Asset/(Liability) |
(in millions) |  | Financial Statement Caption |  | January 28, 2023 |  |  | April 30, 2022 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Net investment hedges |  | Prepaid expenses and other current assets |  | $ | 0.5 |  |  | $ | — |
Net investment hedges |  | Other long-term assets |  | $ | — |  |  | $ | 1.9 |
Interest rate swaps |  | Prepaid expenses and other current assets |  | $ | 2.7 |  |  | $ | — |
Interest rate swaps |  | Other long-term assets |  | $ | — |  |  | $ | 3.0 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Prepaid expenses and other current assets |  | $ | 1.5 |  |  | $ | — |
Foreign currency forward contracts |  | Other accrued liabilities |  | $ | (0.4 | ) |  | $ | (0.2 | )
Effect of derivative instruments on comprehensive income (loss) Gross amounts recorded in other comprehensive income (loss) were as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
(in millions) |  | January 28, 2023 |  |  | January 29, 2022 |  |  | January 28, 2023 |  |  | January 29, 2022 |
Net investment hedges |  | $ | (4.8 | ) |  | $ | 2.4 |  |  | $ | (1.4 | ) |  | $ | 5.2 |
Interest rate swaps |  |  | (1.0 | ) |  |  | 0.7 |  |  |  | (0.3 | ) |  |  | 1.3 |
Total |  | $ | (5.8 | ) |  | $ | 3.1 |  |  | $ | (1.7 | ) |  | $ | 6.5 |

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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 https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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