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Derivative Instruments and Hedging Activities | 9 Months Ended
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Feb. 01, 2025
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 using various pricing models that incorporate observable market parameters, such as interest rate yield curves and foreign currency rates and are classified as Level 2 within the fair value hierarchy. For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded in 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 operations 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 operations 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 is exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries. To manage this risk, the Company designates certain qualifying derivative and non-derivative instruments, including cross-currency swaps and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries. The Company had a fixed-rate, cross-currency swap, with a notional value of $60.0 million (€54.8 million), that settled in December 2024 with a gross gain of approximately $3.1 million. The cross-currency swap was designated as a hedge of the Company’s net investment in a euro-based subsidiary. The gain will remain in AOCI until the hedged net investment is sold or substantially liquidated. 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 February 1, 2025 and January 27, 2024, the Company recorded a loss of $0.1 million and zero, respectively, in interest expense, net in the condensed consolidated statements of operations. For the nine months ended February 1, 2025 and January 27, 2024, the Company recorded gains of $0.4 million and $1.1 million, respectively, in interest expense, net in the condensed consolidated statements of operations. The Company has €275.0 million of long-term borrowings under its Amended Credit Agreement (see Note 8 “Debt”) which was designated as a net investment hedge of the foreign currency exposure of its investment in its euro-denominated subsidiaries. On December 18, 2024, the Company de-designated these long-term borrowings as a net investment hedge. As of December 18, 2024, the cumulative gain, net of tax, was $9.0 million which will remain in AOCI until there is a substantial liquidation of the Company’s net investment of its euro-denominated subsidiaries. Due to changes in the value of the euro-denominated long-term borrowings designated as a net investment hedge, in the three months ended February 1, 2025 (through the date of de-designation) and January 27, 2024, a gain, net of tax, of $7.7 million and loss, net of tax, of $5.9 million, respectively, were recognized within the currency translation section of other comprehensive income (loss). In the nine months ended February 1, 2025 (through the date of de-designation) and January 27, 2024, a gain, net of tax, of $4.8 million and $1.4 million, respectively, were recognized within the currency translation section of other comprehensive income (loss). Included in AOCI related to this net investment hedge were cumulative gains of $9.0 million and $4.2 million, respectively, as of February 1, 2025 and April 27, 2024. The Company is now managing the related foreign exchange risk of its €275.0 million of long-term borrowings not designated as a net investment hedge through certain Euro denominated financial assets. Interest rate swaps The Company utilizes interest rate swaps to limit its exposure to market fluctuations on its variable-rate borrowings. The interest rate swaps effectively convert a portion of the Company's variable rate borrowings to a fixed rate based upon a determined notional amount. The Company has an interest rate swap, maturing on October 31, 2027, with a notional value of $137.0 million (€132.0 million). 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 February 1, 2025 and January 27, 2024. 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 expense, net, along with the foreign currency gains and losses on monetary assets and liabilities, in the condensed consolidated statements of operations. As of February 1, 2025 and April 27, 2024, the Company held foreign currency forward contracts with a notional value of $152.8 million and $110.9 million, respectively. During the three and nine months ended February 1, 2025, the Company recognized a loss of $4.7 million and $4.2 million, respectively, related to foreign currency forward contracts in the condensed consolidated statements of operations. During the three and nine months ended January 27, 2024, the Company recognized a gain of $0.6 million and a loss of $2.1 million, respectively, related to foreign currency forward contracts in the condensed consolidated statements of operations. Effect of derivative instruments on comprehensive income (loss) The pre-tax effects of derivative financial instruments recorded in other comprehensive income (loss) were as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | February 1, 2025 |  |  | January 27, 2024 |  |  | February 1, 2025 |  |  | January 27, 2024 |
(in millions) |  | (13 Weeks) |  |  | (13 Weeks) |  |  | (40 Weeks) |  |  | (39 Weeks) |
Net investment hedges |  | $ | 2.6 |  |  | $ | 0.3 |  |  | $ | 1.8 |  |  | $ | 1.5 |
Interest rate swaps |  |  | 0.1 |  |  |  | (3.1 | ) |  |  | (2.6 | ) |  |  | (5.8 | )
Total |  | $ | 2.7 |  |  | $ | (2.8 | ) |  | $ | (0.8 | ) |  | $ | (4.3 | )
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 condensed consolidated balance sheets as follows:
|  |  |  | Asset/(Liability) |
(in millions) |  | Financial Statement Caption |  | February 1, 2025 |  |  | April 27, 2024 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Net investment hedges |  | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 1.3 |
Interest rate swaps |  | Other long-term liabilities |  | $ | (4.7 | ) |  | $ | (2.1 | )
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Other accrued liabilities |  | $ | (0.8 | ) |  | $ | (0.2 | )

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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