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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended
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Jul. 31, 2014
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | NOTE 10 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Financial Instruments The Company uses derivatives from time to time to mitigate partially the effect of exposure to interest rate movements, exposure to currency fluctuations and energy cost fluctuations. Under ASC 815, “Derivatives and Hedging”, all derivatives are to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are recognized in either net income or in other comprehensive income, depending on the designated purpose of the derivative. While the Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts, its counterparties are established banks and financial institutions with high credit ratings. The Company has no reason to believe that such counterparties will not be able to fully satisfy their obligations under these contracts. During the next twelve months, the Company expects to reclassify into earnings a net loss from accumulated other comprehensive income of approximately $0.2 million after tax at the time the underlying hedge transactions are realized. ASC 820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial and non-financial assets and liabilities. Additionally, this guidance established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:
| • |  | Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets and liabilities.
| • |  | Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities.
| • |  | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
Recurring Fair Value Measurements The following table presents the fair value for those assets and (liabilities) measured on a recurring basis as of July 31, 2014 (Dollars in millions):
|  | October 31, 2013 |  |  |
|  | Fair Value Measurement |  |  | Balance sheet
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Location
Interest rate derivatives |  | $ | — |  |  | $ | (0.9 | ) |  | $ | — |  |  | $ | (0.9 | ) |  | Other long-term liabilities
Foreign exchange hedges |  |  | — |  |  |  | 0.3 |  |  |  | — |  |  |  | 0.3 |  |  | Prepaid expenses and other current assets
Foreign exchange hedges |  |  | — |  |  |  | (1.0 | ) |  |  | — |  |  |  | (1.0 | ) |  | Other current liabilities
Total* |  | $ | — |  |  | $ | (1.6 | ) |  | $ | — |  |  | $ | (1.6 | ) |  |
|  | July 31, 2014 |  |  |
|  | Fair Value Measurement |  |  | Balance sheet
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Location
Interest rate derivatives |  | $ | — |  |  | $ | (0.4 | ) |  | $ | — |  |  | $ | (0.4 | ) |  | Other long-term liabilities
Foreign exchange hedges |  |  | — |  |  |  | 0.1 |  |  |  | — |  |  |  | 0.1 |  |  | Prepaid expenses and other current assets
Foreign exchange hedges |  |  | — |  |  |  | (0.2 | ) |  |  | — |  |  |  | (0.2 | ) |  | Other current liabilities
Total* |  | $ | — |  |  | $ | (0.5 | ) |  | $ | — |  |  | $ | (0.5 | ) |  |
* | The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, current liabilities and short-term borrowings as of July 31, 2014 approximate their fair values because of the short-term nature of these items and are not included in this table.
Interest Rate Derivatives The Company has interest rate swap agreements with various maturities through December 2014. These interest rate swap agreements are used to manage the Company’s fixed and floating rate debt mix, specifically the Amended Credit Agreement. The assumptions used in measuring fair value of these interest rate derivatives are considered level 2 inputs, which were based on interest from the counterparties based upon the LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument is recognized in earnings immediately. As of July 31, 2014, the Company has two interest rate derivatives (floating to fixed swap agreements designated as cash flow hedges) with a total notional amount of $150 million. Under these swap agreements, the Company receives interest based upon a variable interest rate from the counterparties (weighted average of 0.15% as of July 31, 2014 and 0.17% as of October 31, 2013) and pays interest based upon a fixed interest rate (weighted average of 0.75% as of July 31, 2014 and 0.75% as of October 31, 2013). Losses reclassified to earnings under these contracts were $0.2 million and $0.2 million for the three months ended July 31, 2014 and 2013, respectively; and were $0.7 million and $0.6 million for the nine months ended July 31, 2014 and 2013, respectively. These losses were recorded within the consolidated statements of income as interest expense, net. The fair value of these contracts was $0.2 million and $0.6 million recorded in accumulated other comprehensive income as of July 31, 2014 and October 31, 2013, respectively. Foreign Exchange Hedges The Company conducts business in various international currencies and is subject to risks associated with changing foreign exchange rates. The Company’s objective is to reduce volatility associated with foreign exchange rate changes. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the value of certain existing foreign currency assets and liabilities, commitments and anticipated foreign currency cash flows. As of July 31, 2014, the Company had outstanding foreign currency forward contracts in the notional amount of $115.7 million ($137.6 million as of October 31, 2013). At July 31, 2014, these derivative instruments were designated and qualified as fair value hedges. Adjustments to fair value for fair value hedges are recognized in earnings, offsetting the impact of the hedged item. The assumptions used in measuring fair value of foreign exchange hedges are considered level 2 inputs, which were based on observable market pricing for similar instruments, principally foreign exchange futures contracts. Losses recorded under fair value contracts were $2.5 million and $1.2 million for the three months ended July 31, 2014 and 2013, respectively; and were $2.6 million and $0.8 million for the nine months ended July 31, 2014 and 2013, respectively. Energy Hedges The Company is exposed to changes in the price of certain commodities. The Company’s objective is to reduce volatility associated with forecasted purchases of these commodities to allow management of the Company to focus its attention on business operations. Accordingly, the Company may enter into derivative contracts to manage the price risk associated with certain of these forecasted purchases. From time to time, the Company has entered into certain cash flow hedges to mitigate its exposure to cost fluctuations in natural gas prices. Under such hedge agreements, the Company would agree to purchase natural gas at a fixed price. There were no energy hedges in effect as of July 31, 2014 or October 31, 2013. Other financial instruments The fair values of the Company’s Amended Credit Agreement and the Amended Receivables Facility do not materially differ from carrying value as the Company’s cost of borrowing is variable and approximates current borrowing rates. The fair values of the Company’s long-term obligations are estimated based on either the quoted market prices for the same or similar issues or the current interest rates offered for the debt of the same remaining maturities, which are considered level 2 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. The following table presents the estimated fair values for the Company’s Senior Notes and the Assets held by special purpose entities (Dollars in millions):
|  | July 31, 2014 |  |  | October 31, 2013 |
Senior Notes due 2017 |  |  |  |  |  |  |  |
Estimated fair value |  | $ | 327.0 |  |  | $ | 334.5 |
Senior Notes due 2019 |  |  |  |  |  |  |  |
Estimated fair value |  |  | 288.8 |  |  |  | 289.9 |
Senior Notes due 2021 |  |  |  |  |  |  |  |
Estimated fair value |  |  | 320.8 |  |  |  | 317.9 |
Assets held by special purpose entities |  |  |  |  |  |  |  |
Estimated fair value |  |  | 54.2 |  |  |  | 50.1 |
Non-Recurring Fair Value Measurements Long-Lived Assets The Company may close or sell facilities or businesses during the next few years as part of restructuring plans to rationalize costs and realize benefits of synergies. The assumptions used in measuring fair value of long-lived assets are considered level 2 inputs, which include bids received from third parties, recent purchase offers, and market comparables. During the three months ended July 31, 2014 and 2013, the Company recognized asset impairment charges of $15.4 million and $2.3 million, respectively. These charges included $4.3 million and $2.3 million of impairment charges related to restructuring plans during the three months ended July 31, 2014 and 2013, respectively. During the nine months ended July 31, 2014 and 2013, the Company recognized asset impairment charges of $15.6 million and $4.6 million, respectively. These charges included $4.5 million and $2.7 million of impairment charges related to restructuring plans during the nine months ended July 31, 2014 and 2013, respectively. Assets and Liabilities Held for Sale The assumptions used in measuring fair value of assets and liabilities held for sale are considered level 2 inputs, which include recent purchase offers, market comparables and/or data obtained from commercial real estate brokers. During the nine month period ended July 31, 2014, the Company has not recorded additional impairment related to assets which were previously classified as assets and liabilities held for sale. During the nine month period ended July 31, 2013, the Company recorded no impairment related to assets which were previously classified as assets and liabilities held for sale. Goodwill and Long Lived Intangible Assets On an annual basis or whenever events or circumstances indicate impairment may have occurred, the Company performs impairment tests for goodwill and long lived intangible assets as defined under ASC 350, “Intangibles-Goodwill and Other.” The Company concluded that no impairment existed as of July 31, 2014 or October 31, 2013. Pension Plan Assets On an annual basis the Company compares the asset holdings of the pension plan to targets established by the Company. The pension plan assets are categorized as either equity securities, debt securities, fixed income securities, insurance annuities, or other assets, which are considered level 1, level 2 and level 3 fair value measurements. The typical asset holdings include:
| • |  | Mutual funds: Valued at the Net Asset Value “NAV” available daily in an observable market.
| • |  | Common collective trusts: Unit value calculated based on the observable NAV of the underlying investment.
| • |  | Pooled separate accounts: Unit value calculated based on the observable NAV of the underlying investment.
| • |  | Government and corporate debt securities: Valued based on readily available inputs such as yield or price of bonds of comparable quality, coupon, maturity and type.
| • |  | Insurance Annuity: Value is derived based on the value of the corresponding liability.

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