v2.4.0.6
Fair Value Measures
 12 Months Ended
Oct. 31, 2012
Fair Value Measures

Note 6. Fair Value Measures

ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, establishes guidelines and enhances disclosure requirements for fair value measurements.

The accounting guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance also establishes a fair value hierarchy based on the independence of the source and objective evidence of the inputs used. There are three fair value hierarchies based upon the level of inputs that are significant to fair value measurement:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical instruments in active markets;

Level 2—Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 3—Unobservable inputs to the valuation derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

On a recurring basis, the Company measures the fair value of certain of its assets and liabilities, which include cash equivalents, short-term investments, non-qualified deferred compensation plan assets, foreign currency derivative contracts, and contingent consideration associated with business combinations.

The Company’s cash equivalents and short-term investments are classified within Level 1 or Level 2 because they are valued using quoted market prices in an active market or alternative independent pricing sources and models utilizing market observable inputs. During the second quarter ended April 30, 2012, the Company liquidated all of its short-term investments.

The Company’s non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets and are therefore classified within Level 1.

The Company’s foreign currency derivative contracts are classified within Level 2 because these contracts are not actively traded and the valuation inputs are based on quoted prices and market observable data of similar instruments.

The Company’s borrowings under its credit and term loan facilities are classified within Level 2 because these borrowings are not actively traded and have a variable interest rate structure based upon market rates currently available to the Company for debt with similar terms and maturities. Refer to Note 5. Financial Assets and Liabilities.

The Company’s liabilities for contingent consideration are classified within Level 3 because these valuations are based on management assumptions including discount rates and estimated probabilities of achievement of certain milestones which are unobservable in the market. The Company recorded a reduction of $3.6 million during fiscal 2012, in research and development expenses due to the change in fair value of the liability for contingent consideration. As of October 31, 2012, the fair value of the liability for contingent consideration was estimated at $0.8 million.

 

Assets/Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2012:

 

           Fair Value Measurement Using  

Description

   Total     Quoted Prices in Active
Markets for Identical Assets
(Level  1)		     Significant Other
Observable Inputs
(Level 2)		     Significant
Unobservable Inputs
(Level 3)		  
    (in thousands)  

Assets

        

Cash equivalents:

        

Money market funds

   $ 239,770      $ 239,770      $ —        $ —     

Prepaid and other current assets:

        

Foreign currency derivative contracts

     5,217        —          5,217        —     

Other long-term assets:

        

Deferred compensation plan assets

     100,645        100,645        —          —     
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 345,632      $ 340,415      $ 5,217      $ —     
 

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

        

Accounts payable and accrued liabilities:

        

Foreign currency derivative contracts

   $ 4,827      $ —        $ 4,827      $ —     

Contingent consideration

     469        —          —          469   

Other long-term liabilities:

        

Contingent consideration

     355        —          —          355   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

   $ 5,651      $ —        $ 4,827      $ 824   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2011:

 

Description

   Total     Fair Value Measurement Using  
    Quoted Prices in Active
Markets for Identical Assets
(Level  1)		     Significant Other
Observable Inputs
(Level 2)		     Significant
Unobservable Inputs
(Level 3)		  
    (in thousands)  

Assets

        

Cash equivalents:

        

Money market funds

   $ 543,770      $ 543,770      $ —        $ —     

Short-term investments:

        

Municipal securities

     148,997        —          148,997        —     

Prepaid and other current assets:

        

Foreign currency derivative contracts

     2,161        —          2,161        —     

Other long-term assets:

        

Deferred compensation plan assets

     90,060        90,060        —          —     
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 784,988      $ 633,830      $ 151,158      $ —     
 

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

        

Accounts payable and accrued liabilities:

        

Foreign currency derivative contracts

   $ 16,856      $ —        $ 16,856      $ —     

Contingent consideration

     2,096        —          —          2,096   

Other long-term liabilities:

        

Contingent consideration

     2,200        —          —          2,200   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

   $ 21,152      $ —        $ 16,856      $ 4,296   
 

 

 

    

 

 

    

 

 

    

 

 

  

Non-Marketable Equity Securities

Equity investments in privately-held companies, also called non-marketable equity securities, are accounted for using either the cost or equity method of accounting.

These equity investments are classified within Level 3 as they are valued using significant unobservable inputs or data in an inactive market, and the valuation requires management judgment due to the absence of market price and inherent lack of liquidity. The non-marketable equity securities are measured and recorded at fair value when an event or circumstance which impacts the fair value of these securities indicates an other-than-temporary decline in value has occurred. The Company monitors these investments and generally uses the income approach to assess impairments based primarily on the financial conditions of these companies.

The Company recorded $0.5 million, $1.0 million, and $0.5 million of other-than-temporary impairments during fiscal 2012, 2011 and 2010, respectively. During fiscal 2011, an equity investment with a cost basis of $2.4 million was sold for $3.2 million resulting in a $0.8 million gain. This sale did not include a $1.5 million potential earn out receivable if certain milestones are met by this former investee.

 

The following tables present the non-marketable equity securities that were measured and recorded at fair value within other long-term assets and the loss recorded in other income (expense), net during the following periods:

 

     Balance as of
October 31, 2012		      Significant
Unobservable
Inputs
(Level 3)		      Total
(losses) for
Fiscal 2012		  
     (in thousands)  

Non-marketable equity securities

    $ —         $ —         $ (452 ) 
     Balance as of
October 31, 2011		      Significant
Unobservable
Inputs
(Level 3)		      Total
(losses) for
Fiscal 2011		  
     (in thousands)  

Non-marketable equity securities

    $     92       $     92       $     (999)   

As of October 31, 2012, the Company’s non-marketable securities were $11.7 million of which $7.0 million and $4.7 million were accounted for under the cost method and equity method, respectively. As of October 31, 2011 non-marketable securities of $4.0 million were accounted for under the cost method.